Survey shows agric funding is very low
COMMERCIAL lending to the country’s agriculture sector remains heavily subdued with only 8 percent of farming activities being financed by financial institutions, a survey has shown.
According to a study by the Zimbabwe Land and Agrarian Network (ZLAN), the majority of farming activities were being funded through contract farming arrangements.
Zimbabwean farmers have been finding it difficult to access credit from banks because they do not have security. While the Government has issued 99-year land leases to some small and large scale farmers, most financial institutions have rejected them.
Contract financing models, often criticised by some analysts for being exploitative, have been the most preferred in the absence of consistent credit from local financial institutions.
“We have to think about different strategies to unlock funding for the farmers, one of the obvious ones is for farmers to build corporation among themselves to mobilize resources independently from different types of schemes such as contract farming schemes, which are in any case limited as they cannot accommodate all the farmers,” said ZLAN.
Tobacco, for instance currently has 80 percent of its growers being financed under contract schemes.
ZLAN said Zimbabwe should look at ways of improving commercial lending to the sector to carry forward the success of the 2016 /17 season, which was largely sponsored by the Government.
Last year, the Government spent $192 million under the Maize Import Substitution Programme, also referred to as Command Agriculture, which benefited thousands of farmers.
Addressing journalists on the sidelines of the regional dialogue on land tenure and contract farming in Southern Africa yesterday, Sam Moyo African Institute for Agrarian Studies (SMAIAS) researcher Walter Chambati, said the country need financing mechanisms for the sector to grow output.
He highlighted that contract farming had come in as a gap filler for low commercial funding that the country was experiencing as the banks were struggling to raise offshore capital due to high country risk profile.
Another SMAIAS researcher Mr Freedom Mazwi, said over the past 17 years, the country has been experiencing capital flight with a lot of banks, mostly indigenous ones closing down.
“There is lack of private commercial bank support since the year 2000. The support has shrunk to low levels.
“As a country we had a capital flight compounded by withdrawal of banks, which traditionally supported farmers. This has created a difficult situation.
“However, going forward, we are encouraging farmers to come together and pull resources to buy inputs and identify markets,” said Mr Mazwi