President Kikwete speaks before officiating the establishment of the Tanzania Agricultural Development Bank ((TADB) in Dar es Salaam last week. The creation of the bank is the fulfilment of the promise he made in 2008. PHOTO |SALIM SHAO
What you need to know:
The Tanzania Agricultural Development Bank (TADB) was lunched last week with a capital of Sh60 billion. The bank might lend to farmers through commercial banks, Saccos and other micro-financing institutions. As he officiated the start of the bank President Kikwete said the government would boost its capital to Sh800 billion in eight years.
Dar es Salaam. President Jakaya Kikwete has fulfilled his promise of establishing a financial institution to finance agriculture.
The Tanzania Agricultural Development Bank (TADB) was lunched last week with a capital of Sh60 billion. The bank might lend to farmers through commercial banks, Saccos and other micro-financing institutions. As he officiated the start of the bank President Kikwete said the government would boost its capital to Sh800 billion in eight years.
The promise to establish the bank was made in 2008 when the Kilimo Kwanza initiative was crafted. The initiative, which was created to facilitate “modernization and commercialization of agriculture,” had ten pillars one of which was financing agriculture. The bank was supposed to have started operations at the end of 2009, according to a time table issued by the Tanzania National Business Council with an initial capital of $500 million. That amount of capital would, instead, be mobilised in 8 years, according to President Kikwete.
The initial plan was to get the capital from multilateral and bilateral sources through loans and grants and issuing bonds from to commercial banks. But it seems all these were not done for unspecified reasons. While waiting for the establishment of the agricultural bank some steps were taken to ensure a more steady financial flow to the sector. These include opening a special window in the Tanzanai Investment Bank for concensionary lending to agriculture; a special Kilimo Kwanza fund was established to finance land surveys, capacity building; the Agriculture Sector Development Programme (ASDP) Basket Funding was enhanced. There was also a plans to create legislation to oblige commercial banks to lend a percentage of their deposits on concessionary terms to agricultural production, but that was not done. The plan to create the commodity exchange market is still in the pipeline.
Some other measures were also envisaged to finance agriculture in 2008 during the launching of the Kilimo Kwanza initiative to supplement the would-be-created agricultural development bank. These include increasing the ministry of Agriculture’s budget to “not less than 10 per cent of the whole budget.” This has not yet been implemented. It was also agreed that budgets of all other ministries should be directed to support agriculture.
Another was urging pension funds to set aside some funds to invest in agriculture.
Even as the launching of the bank is a major achievement of President Kikwete, it’s not the first attempt. The first phase government under founding President Julius Nyerere launched the Cooperative Rural Development Bank to finance agriculture. The bank went bankrupt in the 1990’s and was privatized. It now operates as CRDB commercial bank.
