Posted on May, 27, 2016 at 09:19 am
By Michel Nkurunziza
As farmers across the country raise concern over low agricultural loans, high interest rates for those who get it hamper their expected profits. Isaac Mugenzi, a farmer in Kaboko Cooperative in Nyagatare who grows maize, soya, vegetables and beans, says that the loans they get cannot exceed Rwf143m per season compared to the expected harvest.
"KCB bank charges 9% interest which we pay after harvesting. Although some banks charge more than that percentage, we wish the rate decreases to 5%," he says. Mugenzi expects that this year's new agricultural financing initiatives could let more motivation for farmers and cooperatives to boost agriculture productivity.
"The loan given today in our cooperative is spent on labor and buying fertilizers and seeds. But we also need more funds to buy our own machines and drying facilities so that our produce increases quality", he said.
Alphonse Iragena, a farmer in Rutunga sector also noted that Saving and Credit Cooperatives (SACCOs) charge interest rates of 2 to 5%, leading to over 20% interest annually. He says such rates scare away farmers who remain reluctant about seeking loans.
Emmanuel Ndoli, a supply chain manager at Nyange Industries said: "Agro-processors want the sector to be well financed to address issues of quality and quantity of agricultural raw materials. We need good agricultural practices, new resistant varieties, modern techniques. In the eastern region where we get like 50,000 litres of milk during the rainy season, we only receive 5,000 in the dry season".
Nixon Bugo, senior advisor at African Development Bank (AFDB) says agriculture sector in Africa needs $349bn and that there is a financing gap of $50bn. Speaking during a recent meeting in Kigali, Nixon said that Rwanda is the first country to benefit from 'Feed Africa initiative' for agriculture transformation in 10 years from 2016.
The bank is increasing total lending to agriculture from $600 million dollars per year to $2.4 billion per year for ten years. Martin Fregene, a consultant in the agriculture and agro-industries department at AFDB says the risk-sharing facility being proposed in countries will look at cutting interest rates in banks.
"The risk-sharing facility we are proposing has an interest a 50% rate drawback if you pay your loan and there is some money provided by the bank to reduce interest. For example, if interest rate is at 16%, you pay 8% once you benefit from your drawback," he said.
The initiative targets to eliminate hunger, malnutrition and extreme poverty in Africa, making the continent a net exporter of agricultural commodities while reducing agricultural imports worth $35 billion.
"In Africa, agriculture is very important to the economy. In Rwanda, over 70%of the population relies on agriculture and more than 35% of GDP comes from that sector. However, only 4% of commercial lending goes to agriculture", he said.
Fregene says the bank shall support different countries by investing in key food commodities such as rice, maize, livestock, oil palm, cocoa and others. They shall also be working with the commercial banks and central banks to provide research grants, agricultural research centers and identify the best technologies and extend them to farmers.
Source: The New Times