Upscale support to agric sector, RBZ tells banks
THE Reserve Bank of Zimbabwe (RBZ) says financial sector support to agriculture is still rather constrained at below 16 percent in the half year to June 30, 2016.
Zimbabwe is still largely an agro-based economy, and the sector is critical to driving manufacturing sector and exports growth.
RBZ director for bank supervision Mr Norman Mataruka said banks should take a more “holistic” approach to funding the agriculture sector.
“Banking sector lending to agriculture 15,8 percent of total banking sector lending as at June 30, 2016.
“As the Reserve Bank, we think that there is scope to upscale support to the agricultural and rural sectors especially in the context of value chain financing,” he said.
Agriculture presently contributes to 60 percent of the country’s foreign exchange earnings, about 15 percent of Gross Domestic Product and 23 percent of employment. He added: “With a value chain approach, banks can obtain a holistic view of the connections their clients have with other value chain actors and use this knowledge to offer services tailored financial products to address and mitigate risks traditionally associated with the agricultural and rural sectors.
“Agriculture value chain finance offers an opportunity to reduce cost and risk in financing and reach out to smallholder farmers. For financial institutions value chain finance creates the impetus to look beyond the direct recipient of finance and to craft products that best fit the needs of businesses in the value chain.”
Agriculture markets analyst Mr Charles Dhewa believes that funding agriculture should be taken as a national imperative.
“Injecting money in the market should be a national strategic imperative.
“If banks inject $5 million today, by year end it will be $150 million due to short cycle crop calendars and the diversity of commodities which will drive the multiplier effect of the injected money,” he said.
He said small pockets from microfinance institutions were critical for short term financial challenges but a strategic intervention at national level should see banks thinking big and using the market as a powerful business institution.
Despite the financing to the agriculture sector being viewed as low, RBZ monthly reports generally show that the agricultural sector comparatively receives the larger chunk of private sector credit. — BH24