Banks in 99-year leases U-turn

Banks are waiting for the government to start rolling out the 99-year leases to farmers so that they can start accessing loans backed by the instrument, an official has said.

A 99-year lease is a legally binding agreement between the now Ministry of Lands, Agriculture and Rural Resettlement on behalf of the government, which is the lessor and the farmer, who is the lessee.

One of the benefits is that it provides 99 years guarantee of land ownership if the farmer continues to meet the terms and conditions of the lease agreement.

The 99-year lease can be used as collateral for borrowing from financial institutions and can be registered at the Deeds Registry.

Back in 2014, former Lands deputy minister Tendai Savanhu said the government would amend its 99-year leases, as banks remained apprehensive about lending to resettled farmers, citing uncertain tenure and title.

These issues having been settled, banks say they are waiting for government to rollout the instrument, so that they can start extending loans to farmers who want to use the leases as collateral.

Advocacy officer for the Bankers Association of Zimbabwe (BAZ), Clive Mphambela said  no farmers had thus far approached banks with their  99- year leases.

"Let's not rush to say that banks are refusing to accept the 99-year lease because the actual instrument has not been delivered so that banks can start considering them. We have already gone past the stage of negotiations and we are ready to consider the lease in our credit assessment process," Mphambela said.

Mphambela said banks and the government had already reached an agreement on the issue of the 99-year lease and banks were willing to assist farmers with loans.

"There was engagement between the banks and the ministry of Lands on various aspects of the 99-year lease and in that engagement, banks reached a comfortable position, but the outstanding issue is that there are actually no farmers known to us as banks who actually hold the leases," he said.

He said banks were waiting for the lease document  to start their credit assessment process.

"We are waiting for those leases so that we can incorporate the document in the formal credit assessment process. The issue is really on the part of government, they need to speed up the actual rollout of the instrument so that farmers are then able to approach banks to get access to loans,"  Mphambela said.

Nevertheless, Mphambela said two important issues had to be met for a farmer to be eligible for a loan from a financial institution, namely security and transfer of the tenure.

"However, the lease on itself is not a guarantee to get credit but the farmer has to prove that he is a good farmer and has reasonable assurance to stay and invest on the farm for a reasonable time to enable a financial institution to make an informed risk assessment. As such, the security of tenure element needs to be addressed in the lease," Mphambela said.

This is done to avoid situations where a farmer is kicked out of the farm without recourse, which will then prejudice the bank that has extended the loan.

"The second issue is transfer of tenure; the land should come with secure transfer rights to land so that banks can be able to transfer its exposure from one  leaseholder to another without loss of funds," Mphambela said.

"Banks are willing to consider the 99-year leases for farmers who need to access loans but what is actually missing now is for government to actually start issuing out the 99-year leases so that farmers are then able to come to us holding their leases. If you hear anyone saying banks are not accepting the 99-year leases,  that is actually false because no one has actually come with one," Mphambela said.

He said maybe the issue of land audits and surveys was pulling back the government in issuing the 99-year leases.