Success of TADB Smallholder Credit Guarantee Scheme (SCGS)

Prime Minister Kasim Majaliwa receives a TADB branded wheel cover from the TADB Principal Officer of Agency Fund Management, Mr George Nyamrunda. The wheel cover will be used to raise awareness that ‘Agriculture is bankable.

What you need to know:

  • Decrease in Agricultural financing interest rates from between 20% to 24% to between 14% to 17%
  • Disbursed Agricultural loans of Sh 63.45 billion, reaching 8,392 smallholder farmers directly 

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

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

The key goal of TADB’s SCGS is to catalyze commercial banks, community banks and microfinance institutions in Tanzania to increase and improve access to lending by smallholder farmers who generally face challenges to access adapted and affordable finances from the formal financial sector.

Furthermore, TADB promotes lending to other value chain enterprises with strong linkages with smallholder farmers. Through this scheme, TADB also financed horticulture where many women and youth are employed.

 “This scheme has been in operation since 2018 and TADB has been able to create partnerships with ten (10) partner financial institutions namely NMB Bank, CRDB Bank, NBC Bank, Azania Bank, TPB, Stanbic, Finca Microfinance, UCHUMI Commercial Bank, Tandahimba Community Bank (TACOBA) and Mufindi Community Bank (MUCOBA). TADB believes that through partnership, more smallholder farmers can be reached.” said George Nyamrunda, Principal Officer, Agency Fund Management at TADB.

TADB’s SCGS impact attained to date

By December 2020, two years since the SCGS inception at TADB, partner financial institutions had disbursed agricultural loans worth Sh63.45 billion reaching 8,392 direct beneficiaries and 748,377 indirect beneficiaries.

A detailed aggregation of the SCGS reach

Direct beneficiaries: 8,392 out of whom 8,268 are individual farmers (1,528 women and 6,740 men), 98 are farmers’ groups and agricultural cooperatives and 26 are agro-processing SMEs.

The TADB Principal Officer of Agency Fund Management, George Nyamrunda explains to Prime Minister Kassim Majaliwa how the bank has impacted over 8,000 smallholder farmers in two years of the funds at TADB.

Value chain funded

TADB’s SCGS disbursed amount was directed at solving challenges in 29 value chains in cashew, paddy, cotton, coffee, poultry, maize, cassava and sugarcane sub-sectors.

“TADB, through this scheme, also financed horticulture where many women and youth are employed. Sunflower, sesame and in livestock and fisheries smallholders have also benefited from the scheme.” Said Mr. Nyamrunda.

TADB has reached 27 regions

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

Strategic intervention

SCGS has largely impacted smallholder farmers who engage in production activities. Production accounts for over 60 percent of the total loans disbursed followed by agro-processing (30 percent).

“We have been able to disburse loans at different stages of the value chain. Some loans were directed to production, which amounts to Sh 38.16 billion, aggregation & processing Sh 19.2 billion, packaging materials Sh 2 billion, agro-inputs Sh 1.6 billion, aggregation/trading Sh 1.1 billion, storage facilities Sh 1.08 billion and post-harvest management Sh 154.7 million,” he explained.

Prime Minister Kassim Majaliwa seeks a clarification from TADB Principal Officer of the Agency Fund Management, Mr George Nyamrunda, on how TADB administers tractor loans at 9% interest rates to women, youth and government.

Storage facilities and mechanisation

A total of 21 tractors and 7 power tillers were purchased for farmers. One combine harvester for the paddy value chain was also handed over to farmers as well as one cane loader for the sugar value chain. All these are expected to increase production of the farmers. Moreover, regarding storage facilities, 3 warehouses with over 24,000MT of storage capacity were constructed for cashews and cereals.

Partner financial institutions

Lucius Mtewele, Tanzania Postal Bank (TPB) Agricultural Credit Manager, says before the partnership with TADB, they were not extending loans to smallholder farmers. But now they have started to provide loans to support smallholder farmers with farming inputs, and mechanization on friendly repayments terms.

“Through partnerships with TADB, we have been able to decrease the agricultural loans’ interest rates, to 14 percent a year,” said Mtewele.

Prime Minister’s call on the scheme

Speaking during a visit to the TADB exhibition pavilion during the 4th National Economic Empowerment Council (NEEC) exhibitions in Arusha this week, Prime Minister Kassim Majaliwa commended the TADB SCGS, while emphasizing the need for banks to ensure they finance smallholder farmers at low interest rates and affordable terms.

Prime Minister Majaliwa said the government’s goal is to ensure that farmers and other entrepreneurs are empowered to run agriculture and expand their businesses.