Africa-Press – Tanzania. DAR ES SALAAM: AGRICULTURAL finance plays a pivotal role in facilitating the modernisation and commercialisation of farming practices and bolstering global food security.
The agriculture mechanisation, increased awareness and the availability of improved inputs such as certified seeds, fertilisers and pesticides play instrumental roles in facilitating the transition from traditional to contemporary farming methods and technologies.
Farmers in the country have been grappling with inadequate access to formal credit sources and essential productive assets due to diverse constraints like lack of collateral, lack of exposure to financial services among smallholder farmers, high interest rates, complicated loan bureaucracy and lack of formal financial institutions.
To address these challenges, the government adopted agriculture financing reforms aimed at making the sector viable and attractive for the commercial lenders to pump more financing which is fundamental for its growth.
The reforms include the central bank’s reduction of statutory minimum reserve requirement (SMR) and setting aside 1.0tri/- agriculture fund accessible by commercial banks to lend farmers at 9.0 per cent interest.
According to the Bank of Tanzania (BoT) latest monthly economic review, credit extended to agriculture grew by 49.6 per cent in a year ending February compared to 41.8 per cent in the corresponding period last year.
The government through the BoT had established set measures to create a new lending landscape in the banking industry to stimulate financing of economic activities particularly in agriculture sector.
For instance, CRDB Bank tripled its loans to the agriculture sector in one year to a whopping 1.715tri/- last year from 545bn/- in the previous year.
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CRDB’s Group Chief Executive Officer (CEO) and Managing Director, Mr Abdulmajid Nsekela, said despite dishing out 1.715tri/- in one year the sector is still dominated by small-scale farmers by 91 per cent while irrigation area is also small although is picking up. Data show that out of over 44 million hectares of arable land in Tanzania, only 2.5 per cent of it is under irrigation.
“This is still a small amount to say. We need concerted efforts from the government and the private sector to address the challenge,” he said.
CRDB, according to Mr Nsekela, has already started to address some challenges for instance by coming up with special farmers’ loans at affordable rates for acquiring farm machines, building irrigation infrastructure and running the farms.
Also, NMB dished out 1.6tri/- in the last two years as it seeks to make the sector more sustainable and enhance its contribution to economic growth.
The lender’s Chief Executive Officer, Ms Ruth Zaipuna, said during 38th Association of Local Authorities Tanzania annual meeting that 400bn/- out of 1.6tri/- total agriculture loans were extended to farmers at a single digit interest rate of 9.0 per cent.
“Our significant successes in agriculture financing have been the continuous investment in sector knowledge, products and key partnerships with key stakeholders,” she said.
FinScope Tanzania 2023 confirms that primary farming and fishing remain the main sources of income for 9.5 million people that are almost 30 per cent of adults.
According to Tanzania Financial Sector Deepening Trust (FSD Tanzania), farmers need appropriate and affordable loans so that they can invest in buying quality seeds, fertiliser and pesticides to boost harvests and possibly build production infrastructure such as agri-processing facilities to add value to the crops they produce.
The agri-loans helped to boost growth of the sector which employs about two thirds of Tanzanians and contributes nearly the third of the GDP and about quarter of total exports.
“Lack of access to affordable credit prevents these farmers from hiring the additional labour they need or leasing tractors and other machinery to help them with crop planting, cultivation, harvesting and transport,” FSD Tanzania said.
Having access to capital would also enable them to hire labour, purchase machinery to add value to their crops so that they are able to increase the amount they receive for their efforts.
FSD Tanzania added that it is not only quality inputs that are crucial for farmers to grow better harvests but they need financial support throughout the farming process from ploughing land and sowing seeds to harvesting and selling crops, sometimes in markets long distances away.
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