Government to revisits agriculture financing systems

06Aug 2022
Mnaku Mbani
DAR ES SALAAM
The Guardian
Government to revisits agriculture financing systems

THE government, through ministry of agriculture is expected to revisit agriculture financing systems, to come up with proper one that will help to improve lending to agricultural activities, mainly on the production stage.

Minister for Agriculture Hussein Bashe told The Guardian yesterday that the ministry has already formed a special committee, which will be tasked to revisit the whole sector financing by banks and financial institutions.

“The committee, which will be inaugurated by President SamiaSuluhu Hassan, will be responsible for designing proper agriculture financing products, including procedures, terms and conditions,” he said in a telephone interview.

Minister Bashe, who spoke fromMbeya,where he is attending an ongoing agriculture Fair(NaneNane) was responding to The Guardian on the recent banks and Bank of Tanzania (BoT) computations data which painted that an annual growth of agriculture lending reached 42 percent during the year ending June this year from a contraction of 10.7 percent in June 2021.

The minister said despite of the rosy growth data, lending to agricultural activities, which create employment to the majority of Tanzanians is very minimal, challenging that the monetary policies for not supporting a farmer to the maximum.

“It is lucky that for the first time in history, total lending to agricultural activities has hit 2trn/-, out of 25trn/- total banks’ lending to the economy, or 8.3 percent share during the year ending June this year, from 7 percent in 2021, and this was the result of the recent President Samia’s political will to extend agriculture financing,” he said.

He said the major impact has been seen to the unlocked higher lending rates to the sector, but the amount going to finance the sector, especially on production stage is still low, to create major impact to the sector, which contribute a third of the Gross Domestic Product (GDP).

“There is no direct correlation between growing banks’ lending and the transformation of a farmer,” he said, noting that currently, most benefiting activities have been crops trading and not the whole agricultural value chain.

Bashe who is fighting hard to ensure the sector transformation in Tanzania,said agricultural production system is facing financing shortages, as majority of farmers are not accessing loans for land preparation, acquiring machinery,buying seeds, purchasingfertilisers and pesticides as well as other farming requirement.

He also challenged the new accounting standards adopted by banks, the International Financial Reporting Standards (IFRS-9), saying was a barrier to extend financing to agriculture, as farmers need more time to start repaying loans, in contrary with its requirements.

He said through IFRS-9, if a farmer fails to repay one installment, an acquired loan become impairment losses; and to clean that in a bank’sincome statement, a farmer needs to repay at least four installments, which he say needs four farming seasons.

The recent banks and Bank of Tanzania data showed lending to the sector recorded a sharp annual growth of 42 percent during the year ending June, 2022 from a contraction of 10.7 percent recorded during the year ended in June 2021.

“It is not a matter of growth rate, but what we should ask ourselves is that how much is going to agriculture,” he responded.

The annual growth of credits to agriculture was nearly three times higher than the growth recorded during the year ending May at 14.7 percent, according to BoT and banks data.

The growth was higher than mining and quarrying activities which grew by 36.5 percent in June this year from a contraction of 4.6 percent in June last year, dominant personal lending which grew by 27.5 percent against a growth of 17.9 percent respectively.

Other sectors recorded sharp growth during the period reviewed were trade which grew by 25 percent from a contraction of 0.7 percent respectively and manufacturing which grew by 23.5 percent from a contraction of 4.4 percent respectively.

BoT data shows personal lending which involves Small and Medium Entreprises (SMEs) accounts for 38.2 percent of all banks’ lending portfolio, followed by trade with 16.4 percent and manufacturing is third with 10.4 percent.

This shows that despite of contributing to a third of the economy and more than 65 percent of employment, agricultural activities still receive small share of lending from the banking system, which also hinder its growth.

 

 

 

 

 

 

 

Top Stories