Posted on May, 23, 2016 at 08:54 am
Dar es Salaam — Agriculture, Tanzania's leading employer grew at three per cent last year. That happened at a time when the country's economy expanded at 7 per cent.
Economists say Tanzania's reasonable economic growth rates - averaging 7 per cent annually for the past two decades - have not made a dent in poverty because agriculture expanded pitifully.
Despite initiatives such as Kilimo Kwanza and the formation of special financial entities whose major goal is to give loans to the sector, farmers are still finding it increasingly difficult to access the much-needed funds.
According to the Bank of Tanzania's economic review for January 2016, trade, personal and manufacturing activities continued to account for the largest shares of banks' credit to the private sector.
In December 2015, for instance, the three areas accounted for about 50 per cent of the loans extended to the private sector.
On the contrary, credit to agriculture continued to decrease from 8.7 to 7.8 and to 7.7 per cent in 2013, 2014 and 2015 respectively. The government's Second Five-Year Development Plan 2016/17 - 2020/21 shows that agriculture employs about 70 per cent of the working age population.
It contributes 28 per cent to the gross domestic product, 30 per cent of exports and 65 per cent of inputs to the industrial sector.
Bankers say it is risky to loan funds to the rain-fed type of agriculture in which farmers' cash flows are irregular.
"We support farmers in a number of ways - including through working with local and international institutions like the World Bank and the TIB Bank among others though we understand the dangers of doing so," the investments manager at Exim Bank Tanzania, Mr George Assenga, told The Citizen.
According to the head of agribusiness at the National Microfinance Bank (NMB), Mr Renatus Mushi, the financial entity established an agribusiness unit in 2011 but the start was challenging, forcing the management to change it in 2012 to concentrate on lending to only tobacco, coffee, cashew, rice and sugarcane farmers.
"The activities were limited to primary sector financing through farmer organisations like agriculture market cooperatives and farmer groups... we focus on seasonal lending activities. During initial stages, cooperatives were the most beneficiaries. This was followed by taping the market for emerging and commercial farmers in 2014," he told The Citizen.
The bank increased lending to large-scale farmers and businesses from mid-2015.
"The strategy is now to finance the sector through value chain approach and hence more financing to small and medium enterprises involved in agribusiness as well as large companies."
During the time, NMB has issued loans totalling Sh500 billion to over 600,000 farmers and the level of default is low -at 1.4 per cent.
The bank intends to issue Sh500 billion loans to 200,000 farmers in the next two years.
But both Mr Assenga and Mr Mushi would like a number of challenges to be addressed to make the sector attractive to financiers. Taxes on farm produce should be reduced, land acquisition procedures eased and agricultural land surveyed.
Farmers have been complaining that the sector is subjected to too many taxes, levies and regulatory bodies. For instance, there are about 26 different taxes for coffee processors and exporters, while meat processors are also subjected to 45 different types of payments.
"Ideally, a more cohesive approach is required to tackle the sector's development higher... .we need harmonised regulations and certification processes... .we also need more private sector engagement in policy dialogue and unlock the subsector specific hurdles such as importation permits that end up distorting the market... ..Basically, the best way would be to approach the sector in a systemic way," said Mr Mushi.
The systemic process should include not only the core business of agriculture but also the related supporting functions and rules. The supporting functions would include the infrastructure, information and other related services; while the rules would include the regulations, standards and laws.
According to the director of planning, research and policy at the Tanzania Agriculture Development Bank (TADB), Mr Francis Assenga, the future now looks bright and various financial hurdles facing the sector will soon be things of the past.
The bank gives loans to small, medium and large-scale farming outlets with interest rates that range from 12 to 17 per cent - less than 23-30 per cent in commercial banks. "TADB has been receiving $48 million every year for eight years from the government so that its 20-year strategic plan can be implemented... ..a full implementation of this strategy will change the landscape."
The bank will issue loans to over 1,000,000 farmers during the next five years, managing director Thomas Samkyi said here last week. "Currently, we are in the process of training 857 farmers and extending loans totalling Sh40 billion.....In the first phase, we trained some 21,526 farmers in Iringa who were in 89 different groups. Out of them, only eight groups were successful and received a total of Sh1.6 billion in loans," said Mr Samkyi.
During the 2016/2017 budget, the bank plans to issue a total of Sh70 billion loans.
According to Mr Assenga, TADB's focus is to finance agriculture-based enterprises that are operated by associations and individuals.
The aim is to enable them to develop enterprises related to agriculture and its entire value chain.
Source: Inter Press Service