Bankers list ways to boost farming loans

Dar es Salaam. Bankers have asked the government to come up with better agriculture policies, structures and models to reduce risks associated with lending to the sector.

They also challenged the government to put in place a system that will ensure that farmers are registered and their land is surveyed.

“The size of farming land owned by registered farmers should be known at the touch of computer key. This will make it easier for us to trace them,” CRDB Bank director of corporate banking Prosper Nambaya said.

He told participants in the second forum for inclusiveness of financial institutions in supporting the industrialisation agenda through agriculture that making farmers’ names and their land available online would ensure that loans are not issued to “ghost” farmers.

The Tanzania Agricultural Development Bank (TADB) organised the gathering, which brought together representatives from the Ministry of Agriculture, various government institutions, commercial banks and insurance companies.

Mr Nambaya said CRDB Bank has issued hundreds of billions of shillings in loans to cotton and cashew nut farmers because the systems and structures governing the two crops are working. Growers of the two commercial crops are also members of agricultural marketing cooperative Unions (Amcos), meaning that it is possible to keep tabs on them.

Mr John Machunda of the Tanzania Bankers Association (TBA) said climate change and the lack of collateral are among factors that prevent banks from increasing lending to agriculture, adding that markets for crops such as sunflower were not regulated. This this makes it risky for banks to issue loans since prices are not well regulated compared to crops such as tobacco, cashew nuts and cotton.

Agriculture deputy minister Hussein Bashe said Tanzania needs to come up with a model that would bring new crops into the sector’s growth strategy.

“We are trying to work hard to ensure that we invest in local production. The first potential crop that we see at the moment is sunflower. We need to come up with a model of financing for sunflower,” he said.

TADB managing director Japhet Justine said 90 per cent of farmers were not making use of quality seedlings.

Agriculture Seed Agency (ASA) chief executive Sophia Kashenge said the country needs to invest more in irrigation.

“We need Sh24 billion to promote irrigation farming. Last year, we lost 70 per cent of sunflower seedlings on one farm due to drought,” she said.

Banks have for a long time been hesitant to issue big loans for agriculture, which accounts for almost a quarter of Tanzania’s gross domestic product.

Tanzania needed a total of Sh13.8 trillion in five years from 2018 to finance the second phase of the Agricultural Sector Development Plan (ASDP 2) which, along with other schemes, is an integral part of Vision 2025.

The government is supposed to finance 38 per cent of ASDP 2, with development partners providing 57 per cent of funds and beneficiaries taking up the remaining five per cent.

Credit to the sector grew by 9.5 per cent in 2019 compared to 2018, according to Bank of Tanzania (BoT) figures.