Posted on April, 6, 2022 at 08:08 am
The government is expected to start an agriculture facility with an initial investment of $350 million (about Rwf350 billion), Prime Minister Edouard Ngirente has said, indicating that it will help provide farmers loans at less than 10 per cent interest rate.
The Premier said that this is an initiative Rwanda is going to implement in partnership with the World Bank, indicating that it will start in the second half of this year.
He made the disclosure on Monday, April 4, while responding to MPs' concern that loans to agriculture were being charged at high interest rates - of around 18 per cent per year, which is hurting the profitability of farmers.
It was during a session in which the Premier was presenting the government actions related to agriculture inputs to the plenary session of both Chambers of Parliament.
Ngirente said that the project will help address the issue.
Prime Minister Edouard Ngirente presents the government actions related to agriculture inputs to the plenary session of both Chambers of Parliament on April 4. Courtesy
"This is a major agriculture facility we are going to have in Rwanda," he said. "This project will have a component to ease lending to agriculture. We set a target to ensure that loans to agriculture get charged a single-digit interest rate so that farmers get affordable loans under that programme."
Farmers have been pushing for the creation of an agricultural development bank, citing rigorous and prohibitive terms to access credit from commercial banks.
Affordable loans would come in handy in helping farmers to purchase seeds and fertilisers, as well as employing irrigation technologies which are essential for increased productivity.
"Banks give loans to farmers at 18 per cent interest rate and above. There should be ways to grant affordable loans to farmers based on their needs such as through establishing an agriculture bank if need be," said MP Anitha Mutesi said.
Ngirente said that the aforementioned facility will start as a public project helping farmers to get access to finance, but as they repay loans, the fund will become sustainable and ensure continuity of agriculture financing.
"This is a project we carefully planned so as to help farmers have access to low-cost interest rates because we know other constraints that affect the agriculture sector," he said.
Addressing low lending to agriculture
For a sector that accounts for about a third of the country's GDP and employs about 70 per cent of its workforce, various sector players have been arguing that it needs a special bank to unlock its potential.
This is the case because the sector gets only 5.2 per cent of total loans disbursed by financial institutions in the country. Rwanda targets to double this agriculture sector lending to 10.4 per cent by 2024.
Low lending to the sector was partly attributed to various risks associated with agriculture such as crop and livestock diseases, drought and floods that adversely affect yields.
Some argued that even in the absence of an agriculture banks, the Government could do more in terms of mobilising more resources to support agriculture financing.
According to farmers, normally, they have to repay a loan on a monthly basis, yet they get money from their produce after a season (about four to six months), adding that the current payment terms were a challenge to them.
Senator Laetitia Nyinawamwiza said that though some members of the private sector were willing to venture into agriculture, financial institutions were not facilitating them enough in terms of financing.
"Farmers and businesspeople (those engaged in commerce) were not being treated equally in terms of access to loans. There were delays in the provision of loans to farmers yet they grow according to farming seasons. There is a need for an agribusiness desk which ensures that farmers get timely loans," she said, wondering whether there were plans to set up an agriculture bank.
Rwanda's agricultural exports generated over $543 million (about Rwf543 billion) in 2021 compared to over $390 million in 2020, representing an increase of 39 per cent, according to statistics published in February this year by the National Agricultural Export Development Board (NAEB).
Source: The New Times