Dar es Salaam — The notion that agriculture is not bankable has bedevilled farming for decades, with commercial banks virtually shutting their doors on the sector ostensibly on grounds that it is risky business.
Unless and until a farmer provides tangible collateral - preferably a title deed to land or other property - no commercial bank would touch them with a barge pole. This is largely because, for instance, banks assume that livestock rearing is fraught with risks of animal diseases outbreaks, or farm crops could perish from weather vagaries.
However the Tanzania Agriculture Development Bank (TADB) says there has been a paradigm shift starting from last year - what with the bank providing over Sh100 billion in loans to finance some 90 projects. Better still, borrowers have finally dispelled fears of non-performing loans (NPLs) by loan repayments totalling over Sh30 billion during the period, with the NPLs rate maintained at well below three per cent.
This was said by TABD managing director Japhet Justine in an interview with the Mwananchi Thought Leadership Forum (MTLF) in Dar es Salaam last Friday.
Apart from the accustomed mind-set that agriculture is a risky venture, Mr Justine identified the biggest challenge to his bank is that borrowers lack adequate project proposals - with some of them proposing projects which don't indicate how smallholder farmers will be incorporated either directly or indirectly.
"The proposals have gaps which make them not bankable. For example, they don't clearly indicate how the projects would be implemented; if the cash flow would be enough to help repay the loan. Most also fail to demonstrate ready access to reliable markets for their goods," he said.
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However, he noted that TADB is working with various partners to assist farmers and livestock keepers to develop bankable proposals for financing by banks and other financial institutions.
Working with the Livestock and Fisheries ministry, TADB has established a dedicated Private Sector Desk which - among other things - prepares and/or screens project proposals before they are submitted to the bank.
"So far, we have received projects worth more than Sh60 billion," Mr Justine said, citing two of the projects worth more than Sh20 billion, and involving 7,000 livestock-keepers, as having been funded with capacity to take off.
"Plans are under way to unlock these value chains and realize their benefits," he said, stressing that "TADB interventions mean we can double the number livestock keepers."
In order to facilitate the delivery of balanced and inclusive financing of agriculture - and as part of TADB's overall financing approach - Mr Justine noted that the Bank has adopted the Clustering and Value Chain Financing approach.
This has helped identify eight clusters (consistent with the country's agro-ecological zones) and value chains of focus - based on which TADB interventions are being implemented.
As a result of these efforts, the TADB chief pointed out that the bank grew its portfolio of disbursed loans from Sh662 million as of March 31, 2016 to Sh712.9 billion by the end of April 2019.
Noting that the loans have benefited 91 projects and over 1.7 million farmers countrywide, the MD said part of the funds were advanced to finance the off-taking of cashews farming in the 2018/19 season, with payments made to some 404,000 farmers in the country's main cashews growing regions to-date.
"Plans are under way to finance three cashew processing plants," he said, adding that TADB "is working on a small and medium scale processing solution that would ensure we add value in the country."
Revealing other key achievements by TADB, Mr Justine stated that the bank advanced a loan of Sh6.6 billion which facilitated procurement and supply of pesticides to over 400,000 cotton farmers in 17 cotton-growing regions and 13 districts during the 2018 cotton season.
As a result, Tanzania enjoyed bumper cotton harvests whereby 221,600 tonnes of cotton were harvested: a 67 per cent increase compared to 133,000 tonnes harvested in 2017. In efforts to promote cotton farming mechanization and increase productivity, TADB extended loans worth Sh2.83 billion for purchasing tractors by 50 cotton-growing AMCOS with 6,864 members in the Lake Zone, he stated.
Pointing out successes recorded in the development of the new coffee marketing system, Mr Justine explained that TADB, working in partnership with the government of President John Magufuli, advanced a total of Sh30 billion to facilitate the processing and marketing of coffee in Kagera Region in the 2018 farming season, thus benefiting 201,236 local famers.
TADB intervention also facilitated the revival of three cooperative unions in Kagera Region to their former glory: Kagera District Cooperative Union (KDCU), Kagera Cooperative Union (KCU), and Ngara Farmers' Cooperative Union.
Mr Justine also cited milestones in facilitating farmers' access to finance, markets and technologies through a project implemented in collaboration with the Farm to Market Alliance (FTMA).
Through the partnership, TADB has extended loans of over Sh1.2 billion to eight maize farmer groups in Ruvuma and Rukwa Regions.
Under arrangements with WFP and other players like Yara and Rabobank, TADB aims at supplying maize growers with quality seeds, fertilizers, storage facilities and markets, Mr Justine revealed.
In separate arrangements, the bank is operating a smallholder credit guarantee scheme (SCGS) with local banks. The guarantee enables farmers to access loans from commercial banks through TADB's partner banks - namely NMB, CRDB and TPB - as well as other banks.
The SCGS programme has $20 million in the kitty, and will enable farmers to access loans of up to Sh44 billion in the first phase of its implementation.
This is an opportunity for local industries that are operating below capacity to engage TADB on how the funds can be accessed to increase production.
Regarding milestones related to furthering the government's industrialization agenda, Mr Justine stated that TADB has approved a total of Sh17.15 billion to finance eight agro-processing factories along the dairy, meat, sunflower, cereals, and aquaculture value chains in some regions.
"We are happy to do more, since agro-processing is an opportunity to employ more people, and also double exports earnings while substituting imports of, for example, edible oils and other agriculture-related finished products," he said.
Additionally, TADB has advanced a total of Sh10.32 billion to finance nine irrigation projects for paddy, maize, sorghum, barley and horticultural farming, and pastures for animal feeds.
To bring TADB services closer to intended beneficiaries, the bank has opened three zonal offices, namely TADB Eastern Zone Office in Dar es Salaam; TADB Lake Zone Office in Mwanza, and TADB Central Zone Office in Dodoma. The bank is also about to open another zonal office in the Southern Highlands in Mbeya Region, and a liaison office in Kigoma Region.
Going forward, Mr Justine said, TADB is implementing a Funding Strategy aimed at raising financial resources from domestic and foreign sources to facilitate lending to agricultural projects countrywide.
"We invite investors - local and international - to partner with TADB in transforming the agriculture sector in Tanzania. The opportunities are immense all the way from crops, horticulture, spices, dairy, fisheries and livestock. We are working hard to make sure the vision and tone which is being set by President John Magufuli is realized, and every farmer is uplifted, value chains restructured - and value is added locally through processing," he said.