Farmers bemoan high bank interest rates
FARMERS are saying the interest rates being charged by banks are stifling the growth of the agricultural sector.
Zimbabwe Commercial Farmers’ Union (ZCFU) president Mr Wonder Chabikwa said the interest rates for agricultural loans have been going up since the dollarisation of the country’s economy, rendering the facilities unattractive to farmers.
“Farmers are not accessing loans from banks as we can’t afford to remit. Interest rates were ranging from 10 to 18 percent and when we dollarised they went up to as high as 30 percent. This has made the loans very inaccessible. Agriculture is a primary industry, it can’t afford those high interest rates,” he said.
Mr Chabikwa said there was a need for financial institutions to consider reviewing their interest rates so as to promote improved production and profitability of the agricultural industry.
“We need an agricultural bank whose loaning conditions are geared towards what used to happen in the past. We are not talking about re-inventing the wheel, let’s just flip back on pages and see what conditions were in place when agricultural production was at its best. Farmers used to get loans from agricultural banks and it started by what was called the Land Bank, which was giving out loans at very developmental rates, then we moved on to Agricultural Finance Corporation (AFC), which was also giving out loans to farmers at very low rates with up to 15 years to pay. That’s why things used to move well,” said Mr Chabikwa.
He also said there was still a challenge with regards to the use of land as collateral as most financial institutions still preferred immovable asset in urban settings.
“In the past farmers used to put up land as collateral, nowadays the banks don’t want to use farms as collateral, they prefer using physical houses in urban areas, which is unsuitable because a house is for the family and it’s not in any way linked to business and as such farmers have been losing their houses to banks for failure to repay loans,” he said.
Mr Chabikwa said the initiative by the Government to introduce the Special Agriculture Production Programme popularly coined as Command Agriculture was a noble idea towards capacitating farmers.
“We have contractors, those companies who go into contract farming whereby they provide farmers with inputs and then collect the produce to cover the costs advanced through inputs. This has generally not been a success because most farmers have gone down below what they had before they got into such kinds of contracts after the contractors collected all the produce.
“When Government came in with the Command Agriculture Programme farmers saw it as a huge improvement. Production has improved because with Command Agriculture the Government is not looking at your house in town but at operations at the farm. So with suitable funding like the Command Agriculture farmers will be able to borrow money,” he said.