Only eight out of 100 loans goes to agriculture sector

Dar es Salaam. Only eight out of 100 loans offered by commercial banks are for agriculture, a single factor that has made all other interventions to revamp the sector ineffective.

Top executives of commercial banks were of the common view that funding of agriculture activities remains the biggest challenge to the sector but said they are committed to reverse the trend.

Speaking during Mwananchi Thought Leadership Forum (MTLF) on agriculture, managing director of Tanzania Agriculture Development Bank (TADB), Mr Japheth Justine, said the situation was discouraging.

According to him, only Sh1 trillion was offered by commercial banks as loans to agriculture sector in 2017.

“Even time for repayment of loans provided by commercial banks is too short for farmers and investors to afford. It is hard for an investor of agriculture to return the loan within five to six years. They need more time,” he noted.

He said TADB was planning to increase loans to the agriculture sector to at least 15 per cent, making commercial banks offer at least Sh4 trillion per year.“We plan to engage commercial banks and set a standard amount for agriculture. We learnt this from India where they commanded all banks to direct 15 per cent of the amount of loans they offer to agriculture,” he noted. He bank has so far offered more than Sh102 billion to farmers and other investors of agriculture activities.

He said for a long time commercial banks have been shutting their doors on agriculture on the ground that the sector is risky business. “But now there had been a paradigm shift,” he said.

“Some Sh80 billion is set aside as the guarantee scheme for small- scale farmers. We are committed to dishing out half of the amount while the rest is to be disbursed by other commercial banks,” noted Mr Justine. The NMB Bank senior manager for agribusiness, Mr Carol Nyangaro, said the bank has so far issued some Sh450 billion in loans to farmers in the past four years.

The Citizen understands that the bank had issued the aforementioned amount to 1.5 million farmers since 2015.

Over 300 small and medium scale farmers’ cooperative societies, agricultural inputs processors and traders are on the list of beneficiaries.

A policy advisor to ASPIRES, an organization dealing with promotion of agriculture, David Nyange said on 6.7 per cent of loans issued in the year 2017/2018 went to agriculture sector.

“Long term loans rare, there is a need for nontraditional loans like leasing and equity,” he said.

He said from year 1997-2017 only 5.6 per cent of investment under the Tanzania Investment Centre (TIC) were for the agriculture sector. The number, however, jumped to 8 per cent last year.