PRIVATE Agricultural Sector Support Trust (PASS) is not a new name in Tanzania with its significant contribution in the development of Agricultural sector. Through its credit facilities the trust is committed towards agricultural revolution in this country.
The organisation's Managing Director, Mr Iddy Lujina granted this interview to our Correspondent MOSES FERDINAND recently. Excerpts...
QUESTION: You have recently announced a new Board of Trustees. What does this mean to the development of PASS?
ANSWER: "Given the high level of expectations on the contribution of the Private Agricultural Sector Support Trust (PASS) in catalyzing wider provision of credit facilities into agricultural sector, the varied skills and experiences of the team members complement each other very well.
The Board of Trustees possesses unique strengths to take on exciting and innovative interventions to speed up development of the agricultural sector through diverse financial products. All the trustees have excellent academic qualifications and 15 to 30 years of valuable experience in agriculture development and business management.
Given the wide economic opportunities that are available in Tanzania, in the immediate region and globally, the Board is expected to steer PASS to enable investors to exploit our vast resource base and resultant comparative advantage in the agricultural sector. The Board and I firmly believe in PASS future and we are committed to delivering exemplary development results while ensuring that the trust is financially and operationally sustainable. PASS Trust's vision is 'to become a leading organization in the provision of financial and business development services in the agricultural sector and so far results indicate that we are on the right path. I therefore look forward to working with our talented management team and dedicated employees to chart that future course.
Q: The Private Agricultural Sector Support Trust (PASS) emerged a winner in three different categories in 2012's agricultural exhibition, popularly known as 'Nane Nane' in Dodoma, Morogoro and Mbeya. What are you doing to keep your record high this year?
A: Yes, we won last year (2012) in all three zones, because of the good results of our development interventions throughout the country which has been appreciated by all stakeholders. We facilitate farmers' access to financial facilities from commercial banks. This year we plan to participate in the new zones where we have recently opened our zonal offices, that is, Mwanza, Mtwara, Arusha and Kilimanjaro. We also have introduced new products which we will showcase in this year's show.
Q: Are you satisfied with the level of support you are getting from the country's financial institutions?
A: I can say we are satisfied but there is still room for improvement. There are some banks that we have collaborated with for over ten years and we have almost perfected our relationship. There are new partners whom we are still in the learning curve and it will take some more time to sort out various teething challenges.
However, the main thrust for all of us (banks and PASS Trust) is to find ways to improve accessibility of credit to farmers and agribusiness entrepreneurs. I am glad to say that more banks have realized the critical importance of the sector in the overall development of the economy and are gradually realigning their services to meet particular requirements in provision of credit to the agricultural sector.
Q: PASS Trust has set a special concessionary lending terms for women entrepreneurs to enable them qualify for more bank loans. What is the progress of this initiative so far?
A: This is one of the special considerations that PASS Trust has instituted in order to ensure that women are not disqualified from accessing bank loans because of inadequate collateral. As a result more women owned businesses have been able to qualify for bank loans and in a way improved the gender balance.
Q: Whereas 98 per cent of agriculture production in industrialized countries undergoes processing, only 30 per cent is processed in developing countries. What is your comment on this situation? What are you doing to address this challenge?
A: Most of the crops produced in this country are sold un-processed to traders who export to regional or world markets. In almost all cases, these crops are processed in the countries which import them and then some are exported as finished goods back into Tanzania.
This situation is historical as since pre-independence the effort has always been to encourage increased volume of exports particularly of the so called 'cash crops.' This is flawed in that prices of raw commodities are usually low in the world market and are prone to erratic fluctuations. Prices of processed goods are higher and more stable. On the other hand the process of local value addition benefits the country by creating employment and other multiplier effects.
For example, processing of by- products that feed into other economic segments like processing edible oil yields, a by-product of seed cake that is used to manufacture animal feed and in turn improves livestock industry, etc. PASS Trust is addressing this gap by launching several products which assist entrepreneurs in the agribusiness sub-sector to acquire machinery and equipment to set up agro processing facilities. So far we have covered many areas including processing of dairy products, edible oil, cotton ginnery and textiles, sisal twine, rice and maize milling, animal feeds, etc.
Q: What are your views on the state of agriculture in Tanzania today? Apart from the ongoing initiatives and programmes, what else should be done to make progress in this sector?
A: The agriculture sector in Tanzania is a driving force of the economy as it employs more than 70 per cent of the population. However, the rate of development and its contribution to the economy GDP is still too low. The basic problem here is the low productivity. This is basically due to low technology, inadequate use of farm implement and lack of suitable equipment and poor agronomic practices.
In addition, inadequate marketing systems do not motivate higher production. There are several development programmes which are addressing these challenges, including ASDP, SAGCOT, DASIP. PASS Trust is in the centre of it all because adoption of better agricultural practices requires timely availability of credit on reasonable terms.
Thus, the role of PASS Trust in facilitating credit supply to the sector is a critical component for all initiatives of improving agriculture production. For larger investments as required for irrigation schemes there is scarcity of suitable funds as commercial bank loans are mostly for medium size investments of about 5 years. We understand there are plans to open an agricultural bank for the country, which will cover such particular investments.
Q: What can you cite as your notable achievements in 2012?
A: Notable achievement in 2012 is the increase number of beneficiaries of PASS Trust services. Records show that in 2011 PASS Trust facilitated about 11,000 farmers to access loans worth 22bn/- from commercial banks through our business development services and credit guarantees. In 2012 the loans were expected to reach 30bn/-. We are pleased that we have improved our outreach significantly by opening four zonal offices.
To date we have branches in Morogoro for the central zone, Mbeya for South western zone, Dar es Salaam for the coastal regions, Mwanza for the Lake Zone, Moshi branch covering Northern Zone and Mtwara covering south eastern Zone. By the end of 2012 we introduced new innovative products that target specific areas that hinder development in agriculture. Availability of machinery and equipment would be eased using our lease product.
Community banks play an increasingly important role in respective zones. PASS Trust will assist the community banks to access adequate resources for lending to their customers on better terms. We will also provide more portfolio guarantees to partner banks in order to speed up issuing of loans to more farmers and agribusiness.
Q: What message would you like to tell farmers in Tanzania?
A: We are always saying to farmers "PASS Trust is Your Way to Success." We have supported more than 100,000 farmers to access credit to the tune of 120bn/- in the past ten years. Our new five year programme aims to support 300,000 farmers to access loans totalling 290bn/-. We have been able to do all these with a default rate of five per cent which is commendable, given the fact that the type of customers we are working with are mostly start ups.
Q: Any message to the government and other stakeholders you are working with?
A: PASS Trust will continue to play our role as a responsible and keen supporter of farmers and investors who are committed to borrow and pay back loans on time. We have seen that, given the government's effort in facilitating faster expansion of credit supply, some parties are abusing the initiative by embezzlement of funds or refusing to pay back loans with flimsy excuses they can get.
Unfortunately, many of them are getting away with it. This is going to discourage lenders and will force them to tighten lending terms, thus, hurt even the good borrowers. We therefore request the government to clean up the unregulated institutions, e.g. SACCOS, AMCOS and cooperatives so that they become more accountable. These are potentially very useful financial intermediaries if they could be operated more professionally. Establishment of effective Credit Reference Bureaus would assist banks in avoiding losses from willful defaulters.
Q: Can you tell us the plans for 2013?
A: Our plan for 2013 is consolidation of the recently opened branches in Moshi and Mtwara. The Moshi branch covering North Eastern zone has diverse opportunities particularly the horticulture industry, dairy and agro processing which we will pursue vigorously. The Mtwara zone is mostly known for cashew nuts and sesame crops.
However, given the newly discovered natural resources in the zone, there is a big population pressure moving into the area. The demand for all agricultural and food products will increase tremendously. Therefore PASS Trust will work with all entrepreneurs who are ready to invest in the regions to exploit this huge food demand.
In addition, we will continue to assist entrepreneurs in all the other zonal offices to grow their businesses through easy access to bank loans. Currently, we are collaborating with the following banks: CRDB, NMB, TIB, Exim Bank and Kilimanjaro Coop Bank. Given that there are over 40 registered banks in the country, there is room to work with more banks and reach out to more customers. We thus invite other commercial banks to engage us and utilize our resources to extend loans to the agricultural sector at reduced risk levels.