Zimbabwe: Agriculture Tops Micro-Finance Loan Book

23 September 2019

Good rains anticipated countrywide during the 2019/20 farming season, have seen agriculture topping the micro-finance loan book (35 percent) as reported in the sector's performance report for period ending June 30, 2019.

Speaking to The Herald Finance and Business, Zimbabwe Association of Micro-Finance Institutions (ZAMFI) executive director, Godfrey Chitambo, said growth in agriculture loans owed to anticipated good season and is testimony to the sector's vital role in economic development.

"According to our latest performance report on micro-finance as at June 30, 2019, the figure has since increased to 35 percent due to anticipated good season of agriculture.

"This is a good sign as the sector contributes significantly to economic growth, source of employment, foreign currency earnings and raw materials for the productive sectors," said Mr Chitambo.

Figures released by ZAMFI, indicate agriculture had gobbled most of the MFIs' funds (35 percent) with business loans accounting for 29 percent and consumption loans at 24 percent. Other loans accounted for 12 percent of total lending.

Overall, the sector's loan book indicated a 26,4 percent increase in lending to $316 million for

the period to June 30, 2019 compared to $250,1 million as at March 31, 2019, an indication of the sector's growth.

According to ZAMFI executive director, there is an increase in the number of small holder farmers applying for agricultural loans since the business is a lucrative alternative with sound returns.

Mr Chitambo further underscored the need for increased lending by micro-finance institutions to support small holder and rural contract farmers.

"Many small holder farmers are showing interest in accessing loans for agriculture as it is proving to be a lucrative and profitable business. For example, tobacco and cotton farmers this year managed to earn a lot of income due to favourable prices at the markets.

"We expect more MFIs to lend more to small holder farmers in rural areas especially under contract farming and value chain finance arrangements. The risks associated with such an arrangement are quite easy to manage and control to the benefit of both parties," added Mr Chitambo.

Agricultural and business loans play a paramount role in economic turnaround strategies and so the micro-finance sector's performance for the period to June 2019 is very laudable.

Combined, the two loans accounted for more than half the loan book at 64 percent. The figures tell a great story about how certain quarters have embraced the economic development route.

"This is a significant shift of the micro-finance business away from the traditional consumption loans, generally regarded as less productive and inflationary.

"The support of the productive sectors of the economy by the MFIs resonates very well with current Government efforts to increase the production of goods and services," said ZAMFI in a statement accompanying the performance report.

Meanwhile, the Central Bank has in its Mid-term Monetary Policy Statement, hinted on the implementation of credit enhancing policies to further ensure easy financial access by Small to Medium Enterprises (SMEs).

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