Oshakati — Agribank has launched a collateral-free loan to enable working communal farmers with no conventional collateral to access agricultural loans.
The product targets salaried communal farmers who have the ability to repay their loans but do not have property in a proclaimed urban environment.
Speaking at the launch at Oshakati last Friday, Chief Executive Officer at Agribank Sakaria Nghikembua said the "no collateral loan" is in line with the bank's strategic plan geared towards inclusiveness for all farmers including those in communal areas.
The inclusiveness of all communal farmers will, amongst other factors, increase food production and contribute to household-level food security.
Speaking at the same event, the Vice-Chairperson of Agribank Board of Directors, Michael Iyambo, said the bank will sign agreements with employers to have repayments of the loan deducted from the payroll monthly.
"As a bank we decided to address the gap whilst reasonably mitigating our lending risks; Instead of paying via banking debit orders, we will deduct via payroll to enhance our collections success rate," said Iyambo.
In addition to the no-collateral loan, the bank has also introduced a credit life to ensure it recovers the loaned money in the event a client passes on whilst still owing the bank.
The bank has also taken a decision to support funding of agro-processing industries in its quest to add value to basic agricultural produce, create employment and aid in expanding production in support of economic growth.
Previously the bank primarily focussed on funding primary production - focussing only on the acquisition of farmland, purchase of livestock, construction or upgrading of farming infrastructure and production inputs for crop production and horticulture.
Iyambo said value addition increase the contribution of agriculture to the country's gross domestic product (GDP), which has been dwindling over the past years.
According to the Namibian Statistics Agency, the contribution of primary agriculture production witnessed a decline from 5.3 percent in 2007 to 3.5 percent in 2016.
Secondary production on the other hand barely contributed more than 1 percent to the overall GDP.
On average, the meat processing and milling sector contributed about 0.5 and 0.7 percent respectively to the total GDP over the period 2007-2016.
"This is a clear indication that the agricultural sector is mainly driven by primary production. The challenge, however, is that primary agricultural production is seasonal; hence demand for labour is highly variable," Iyambo said.
Iyambo added that primary agricultural products are susceptible to irregular changes in prices and as such employment in primary agriculture is not a sustainable source of income.
Ngikembua said the loans will range between N$5 000 and N$500 000 and is repayable over a period of 12 to 54 months.
The Governor of Oshana Region, Clemens Kashuupulwa, said the loan will broaden finance access to emerging communal farmers, which the governor reckons will aid in the alleviation of poverty and food security.