RBZ directs banks to give agriculture loans

THE Reserve Bank of Zimbabwe has instructed banks to ensure that 20 percent of their total loan portfolio must be channeled towards agriculture in a bold move meant to support the sector seen as the fulcrum of the economy.

Over the years, banking institutions have come under the spotlight for under-funding agriculture with some of them coming up with stringent security for farmers while some were not even recognising land as security.

However, Reserve Bank of Zimbabwe Governor Dr John Mangudya said banks were now mandated to channel a fifth of their loan allocation to agriculture.

"Banking institutions are required to report on a quarterly basis information on their agricultural portfolios with effect from quarter period ending 30 June 2016. The detailed variables to be reported will be provided by the Reserve Bank in due course," Dr Mangudya announced in the monetary policy statement which he presented to the nation on Thursday.

His announcement comes as figures showed that in spite of Zimbabwe being generally regarded as an agro-economy with the sector contributing 12 percent of the country's GDP and more than 60 percent of inputs in the sector only accessed 16,36 percent of total loans advanced last year.

In addition was the manufacturing sector which got 24,31 percent while individuals were second at 24,28 percent. Dr Mangudya said the worst hit in terms of accessing agriculture funding were smallholder farmers.

"Given the significance of the agriculture sector to the economy, banking institutions are required to scale up their lending support to the agricultural sector. The Agricultural Marketing Authority (AMA) is called upon to identify and promote the development of vibrant markets and linkages," he said.

He also said the Apex bank was in the process of developing an Agricultural and Rural Credit Policy aimed at making agricultural credit more disciplined and methodical, easily available to all the farmers and all areas with a view to expand banking services to rural areas and maximizing use of agricultural land.

Dr Mangudya said the policy will cover 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 smallholder farmers and rural farmers," he said.

Lending by banks, he added, should focus on farmers producing maize, cotton, tobacco and horticulture. However, Zimbabwe Farmers Union executive director Mr Paul Zacharia said in most cases some of the pronouncements were not reflective of what will be on the ground.

"It is no secret that agriculture is not properly funded in Zimbabwe," he said "Surprisingly we have been hearing figures being thrown most of the time but we do not see that on the ground. We accept that we are facing financial problems but we need to help the farmers."

Mr Zacharia said RBZ must strictly monitor banks to ensure that they abide to such laws.

"In most cases if you go to the banks you get a completely different story. Authorities must follow up on such pronouncements by announcing further supporting actions which must be taken if the banks fail to honour up," he said.

Mr Zacharia said a few months ago, it was reported that farmers would access close to $1 billion but unfortunately the money never cascaded to them.

"We looked for the money but we could not get it," he said.

Bankers said they were still studying the monetary policy and could only give a clear response when they have analysised it.

"Our bosses are still going through a whole statement including that proposal. We can only be able to issue an informed comment next week," said BAZ Finance advisory officer Mr Clive Mphambela.