Rwanda: Tea Farmers Could Be Paying Higher Interest on Loans - PAC

Tea farmers who access loans from the Project for Rural Income through Exports (PRICE) might be faced with a problem of paying a lot of money, which they did no benefit from, the parliamentary Public Accounts Committee (PAC) has revealed.

Members of the Committee made the disclosure on Monday during a hearing in which institutions in the agriculture sector as well as officials at PRICE were tasked to give explanations on the project.

The $56.1 million project, which is comprised of loans and grants, aims to encourage farmers to increase the production of export crops such as tea, vegetables and fruits in addition to booting sericulture - the production of silk and the rearing of silkworms.

When the project was first scrutinised by the Auditor General (AG) in 2015 it got a clean audit.

However, the AG 2017 report revealed that the initiative had delivered mixed results in terms of improving people's livelihoods, hence prompting further scrutiny from PAC.

It was extended to December 2020 from its initial deadline of 2018.

Under the project, the Government facilitated farmers to get loans from Development Bank of Rwanda (BRD). They would then develop the plantations by applying modern business practices through a loan of Rwf600,000 per hectare.

After that, the plantation would be given back to the farmer for management.

Jean-Chrysostome Ngabitsinze, the Chairman of PAC, said that, initial measurements of land size were inaccurate, which made farmers pay more money than the loans they acquired.

He cited an instance where 440 hectares for which farmers were paying back loans while they do not own such land.

"It was realised that there is a farmer who was said to have 22 hectares of farmland yet when GPS was applied, it was discovered that they actually had 11 hectares," he said.

He added: "That means the farmer is paying back 50 per cent of the money for which they did not get yield because they did not have the land of that size."

In addition, he said that the first loan disbursements - provided around 2012 - according to farmers - attracted an interest rate of 8 per cent, while the second was put at 15 per cent a year later.

This means that in just a year interest rates nearly doubled, something he said was not understandable especially because farmers were not informed about the change.

Eugenie Umulisa, a tea farmer in Gatare Sector of Nyamagabe District, told The New Times that though the credit helped farmers increase yields through better farming, they are overwhelmed by the high interest rates.

"Interest rates have become even higher than the principal loan we got. Therefore, we are requesting the government to help waive the interest such that we pay the principal alone over a long period of time," she told The New Times.

Amb. George William Kayonga, the CEO of National Agricultural Export Development (NAEB), said that the loan component was meant to help farmers get their farming activities financed.

He said that some cooperatives have paid off the loans, pointing out that in partnership with different institutions, "we are making assessment for each cooperative. If it is established that money was not well spent, they [cooperatives] will be reimbursed."

Tea is one of Rwanda's major exports. Last year, the country generated $90 million from tea from 30,000 tonnes.

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