Central bank to introduce agricultural funding policy

The Reserve Bank of Zimbabwe is developing an Agricultural and Rural Credit Policy to boost production while ensuring the country's self-sufficiency. This is also meant to increase exports.

Announcing the Monetary Policy Statement on Thursday, RBZ governor Dr John Mangudya said the policy was aimed at making agricultural credit more disciplined, methodical and easily available to all farmers.

He said banking institutions were required to scale up their lending support to the agricultural sector.

"The policy aims to make agricultural credit easily available to all farmers and expand banking services to rural areas and maximising use of agricultural land. It covers the major sectors of agriculture including crop, livestock, and fish production, agri-equipment, irrigation equipment, grain storage and marketing.

"In complementing Government efforts to revolutionalise agriculture through introduction of modern farm-mechanisation, improvement in production yields, promotion of better market access, and integration of farming with other diverse markets, banking institutions should provide more innovative and sustainable value- chain financing products to small holder farmers and rural farmers," he said.

Dr Mangudya urged the banking sector to prioritise lending for the production of maize, cotton, tobacco and horticulture to boost exports.

"Total lending to agriculture should constitute a minimum of 20 percent of a banking institution's total loan portfolio. Banking institutions are required to report on quarterly basis information on their agricultural portfolios with effect from quarter period ending June," he said.

Dr Mangudya encouraged the Agricultural Marketing Authority to identify and promote the development of vibrant markets and linkages.

He said it was Government's thrust to make the nation self-sufficient in food through increasing production of all crops; ensure a profitable and sustainable agricultural production system and improve farmers' income generation capacity.

Government was also promoting production of several crops to reduce excessive dependence on any single crop to minimize risk.

"It is Government's thrust to increase cropping intensity, yield and create opportunities for establishing agro-processing and agro-based industries," he said.

Farmers have always complained over lack of funding which they said affected production.

According to farmers, the available funding is not conducive for agriculture as the banks require collateral and do not accept 99 year leases as security.

Agriculture economist, Mr Midway Bhunu said the move taken by the RBZ was noble since farmers were in need of funding but said the institution should understand the real challenges being faced in the sector.

"The banks should understand farmers' real challenges and capacities so that before the money is released to the banks it is packaged correctly.

"Because banks are in business, they will administer the funds so as to make money. RBZ should do proper costing that accommodates the farmer and the banks," he said.

Mr Bhunu said it was important that RBZ, together with other banks, work with all key agricultural value chain actors and come up with priority areas.

Banks have been prioritising funding of tobacco because of the well-organised market which makes it easier for the financial sector to recover its money.

Mr Bhunu urged banks to consider other lucrative crops such as sugar, beans, potatoes and ground nuts.

Zimbabwe is an agro-economy with agriculture contributing about 12 percent of the country's GDP in 2014 and more than 60 percent of inputs to the manufacturing sector.

Access to financial services, particularly by smallholder farmers, however, remains a major bottleneck to agricultural performance in Zimbabwe.