TADB’s SCGS hits Sh100bn mark

The Tanzania Agricultural Development Bank (TADB), through the Market Infrastructure Value Addition and Rural Finance (MIVARF), administers successfully its Smallholder Credit Guarantee Scheme (SCGS).

In less than 3 years, the scheme has commendably disbursed Sh100 billion in agricultural loans.

In 2018, TADB, in partnership with the Prime Minister’s Office and the ministry of Finance and Planning (MoFP), launched a Smallholder Credit Guarantee Scheme.

The special initiative aims at addressing bottlenecks faced by smallholder farmers and SMEs in accessing commercial credit. The scheme provides banks with liquidity as well as credit guarantees of 50% of the requested loan.

The SCGS is geared towards the TADB’s strategic mandate to enhance smallholder farmers’ access to loans at low-interest rates and affordable conditions. The scheme is financed by the International Fund for Agriculture Development (IFAD) through the MIVARF programme under the Prime Minister’s Office.

“The key goal of SCGS is to catalyze commercial banks, community banks and microfinance institutions in Tanzania to increase and improve access to lending the smallholder farmers.

The smallholder farmers generally face challenges to access adapted and affordable finances from the formal financial sector.

This innovative intervention supported by the government has been able to unlock new loans to the smallholder farmers and SMEs amounting to TZS 106 Billion. The amount has benefited over 11,700 direct beneficiaries," explained Frank Nyabundege, Managing Director of TADB

Mr. Nyabundege added, “For TADB hitting at  Sh100 billion is a milestone that we are proud of. We are proud to have been able to guarantee 11,785 smallholder farmers and SMEs.

The beneficiaries are 11,335 smallholder farmers engaged in primary production activities, 263 SMEs that off-take from the smallholder farmers, 82 AMCOs and 105 farmer groups. We have also been able to partner with 13 key financial players in Tanzania.”

The Partner Financial Institutions (PFIs) that TADB has so far signed partnership agreements under the scheme are NMB Bank, CRDB Bank, NBC Bank, Azania Bank, TPB, STANBIC, Maendeleo Bank, FINCA Microfinance, Uchumi Commercial Bank, Tandahimba Community Bank (Tacoba) and Mufindi Community Bank (Mucoba).

The scheme blends liquidity provision and credit guarantees to incentivize commercial banks, microfinance institutions and community banks to increase their credit appetite towards smallholder farmers.

Supporting access to financial products and services for smallholder farmers is an important contributor to expanding agricultural production which not only supports the country’s food security, but also increases the incomes of rural communities hence reducing poverty and supporting economic prosperity.

TADB believes that through strong and strategic partnerships with like-minded financial institutions more smallholder farmers can be impacted.

The bank has embarked on an aggressive plan to scale its impact on the smallholder farmers through its SCGS instrument and is in deliberations with other development partners to expand the fund size and coverage thresholds from the current 50% to 75% for special groups.

The Agency Fund Management Manager at TADB, Ms Asha Tarimo, explains how the Smallholder Credit Guarantee Scheme has had an impact on the country.

“TADB through the SCGS recognizes that supporting access to financial products and services for the smallholder farmers is an important contributor to expanding agricultural production.

“This supports not only the country’s food security, but also increases the incomes of rural communities thus reducing poverty and supporting economic prosperity. With the smallholder farmers being our key focus, we are optimistic that the fund will continue to grow and address more financing challenges being faced by farmers, “explained Ms Tarimo.

Furthermore, the SCGS promotes lending to other value chain enterprises with strong linkages with the smallholder farmers. This approach is supporting the creation of viable and sustainable markets for smallholder farmers’ production as well as jobs and incomes at the enterprise level.

SCGS’ achievements

The cash amount of Sh106 billion has benefited over 11,700 direct beneficiaries. The beneficiaries are 11,335 smallholder farmers engaged in primary production activities, 263 SMEs that off-take from smallholder farmers, 82 AMCOs and 105 farmer groups.

Value chain funded

TADB’s SCGS disbursed amount was directed to address challenges in 35 value chains including, among others, cashew, paddy, cotton, coffee, poultry, maize, cassava and sugarcanes.

“TADB through this scheme also financed horticulture, which most women and youth are employed in sunflower, sesame and livestock while in fisheries, smallholders have also benefited from this scheme.” Said Ms Asha Tarimo

TADB has reached 27 regions

Through the TADB Smallholder Credit Guarantee Scheme, smallholder farmers in 27 regions both in Tanzania mainland and Zanzibar have been reached.

Strategic intervention

SCGS has impacted largely smallholder farmers engaged in production activities that account for over 50% of total loans disbursed and is followed by agro-processing (30%).

 “We have been able to disburse loans in different stages of the value chain. Some loans were directed to production, which amounted to Sh53 billion, aggregation & processing (Sh33 billion), aggregation & trading (Sh14 billion), packaging material (Sh2 billion), agro-inputs (Sh 2 billion), storage facilities (Sh1.6 billion) and post-harvest management (Sh155 million),” explained Ms Tarimo.

Storage facilities and mechanization

The SCGS has also been active in supporting the reduction of manual work and drudgery at the farm level with loans totaling Sh 4.7 billion channeled towards purchasing of mechanization equipment including tractors, combine harvesters, power tillers and trucks. Moreover, on storage facilities, a total of 29 warehouses with over 25,000MT of storage capacity have been financed for cashews and cereals. Smallholder farmers’ storage facilities are crucial to ensure farmers protect the value of their production as they can store their commodities while awaiting the right market prices to be set hence contributing to improved profits for farmers.                       

Partner financial Institutions

Lucius Mtewele, Tanzania Postal Bank (TPB)’s Agricultural Credit Manager, says before the partnership with TADB they were not extending loans to smallholder farmers but now they do so in order to support them with farm inputs, mechanization and have set friendly repayments modes.

“Through the partnership with TADB, we have been able to reduce the agricultural loans’ interest rates to 14 percent per year.”

The SCGS is a useful instrument that supports banks like ours to advance credit facilities to the smallholder farmers.

The beauty of the TADB SCGS product is that they provide the conventional de-risking product (i.e the credit guarantee) but also complement this offering with liquidity to support the lending activities of the bank, commented Ronald Melkiory, CRDB Bank’s Agribusiness Relationship Manager.

The beneficiaries of the scheme attest to the positive impact of the instrument. Mr. Sebastian Sanindege from Msolwa Ujamaa AMCOs commended TADB and CRDB Bank for bringing financing solutions to sugarcane farmers in Kilombero.“We are happy that the Smallholder Farmers Credit Guarantee Scheme allows farmers not only to access credit guarantees to enhance their collaterals, but also to be offered these loans at affordable interest rates through this scheme,” he said.