Up­scale sup­port to agric sec­tor, RBZ tells banks

Chronicle (Zimbabwe) - - Business Chronicle -

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

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