Banks anticipate high agric loans uptake
LOCAL banks are anticipating high agricultural loans uptake this summer cropping season after most financial institutions started offering salary based finances for farmers to enhance production.
For years, farmers have been stalked by financing problems, but the relaxation of bank loan terms will allow more farmers to access finance. Last year from a resource envelope of $1 billion funding set aside for the agriculture loans, only $395 million was used.
Furthermore, interest rates were reduced to 12 percent this year from 20 last year, therefore stakes are high that farmers will be able to take more loans than previous years.
Source close to Bankers Association of Zimbabwe (BAZ) said due to the success of the Command Agriculture last summer cropping season, most banks have been challenged to make funds available for farmers.
He said: “Due to high repayments of loans in last year’s agriculture season, most banks are offering high productive farmers big loans while giving some small scale farmers salary based loans which are easy to handle.
Banks have sourced $1, 1 billion for this agricultural season and a big chunk of the money is expected to be used.
“Some farmers who have good agriculture records over the years but don’t have collateral are also given loans. Therefore, this year we are likely to have a high agriculture loans uptake.”
One of the biggest reasons banks did not want to fund farmers and agriculture in general was that most farmers failed to repay their loans, resulting in the accumulation of non-performing loans in the agriculture sector.
However, with the coming up of the new facilities and command agriculture programmes, banks now believe that some farmers can access loans without collateral. Such financial institutions include Agribank, Steward Bank, Homelink and CBZ in some instances.
Agribank CEO Sam Malaba, said the agriculture lending bank will give salary based loans to improve the sector and the farmers’ well-being.
“In addition, as part of initiatives for financial inclusion, the Bank has introduced new products, which have a bearing towards agriculture.
“These include salary based inputs facilities (for agriculture inputs and fertilisers) and under the facility farmers with constant source of money will be given loans whether one is formally employed or not,” said Mr Malaba.
Steward Bank has also formed a Fund with multilateral organisations to fund non-collateral loans to mostly small scale farmers.
The Create Fund loans will be accessed at around 10 percent per annum, which is significantly lower than what is being offered by other financial institutions.
Steward Bank’s loans do not need any collateral with most farmers getting salary based loans up to $50 000.
In most instances the bank advances additional fees for other farming activities, which include horticulture, wheat, maize, piggery, poultry, soya, cotton, dairy, beef and crocodile farming.