In an intervention at the 4th annual SADC industrialisation week in Dar es Salaam recently, the TADB managing director, Japhet Justine, said history shows that smallholder farmers have been bypassed by lenders for too long and now deserved a new deal. He emphasised the need to redress the perception that agricultural finance was a high risk undertaking.
“The role of the small guys (smallholders) is known and fundamental.
There must be cash guarantee for de-risking lending to smallholder farmers by banks. It should be up to 50 per cent of defaults and a fee of one per cent per annum --- the most affordable in the market,” he suggested.
He also called for ‘grants or soft loans of hybrid’, suggesting that there must be goodwill in supporting plans, concepts, ideas and initiatives to test new or innovative approaches, methods and services in rural areas.
Justine gave examples of cotton and coffee growers in Tanzania, saying coffee growers in Kagera region received financing through cooperative unions and eligible cashew nut growers benefitted in the same way. The support took the form of transactional finance. Cotton growers were also supported to buy pesticides in 2018 and 2019 farming seasons and agro-processors were supported to by raw materials. The support took the form of working capital, he explained.
The MD also talked of the need to institute blended finance, “SPALF (equity-loan-grant) specially designed to de-risk financing for investment in bulk steel silos and modern processing machines,’ he told experts.
He also said co-financing should be encouraged, saying going by TADB’s experience such form of financing would allow partnership with commercial banks to promote large-scale agri-industrial projects.
The MD said was an important sector of SADC economies as is for the whole of Africa.
But said as for Tanzania, the sector’s importance is appreciated by considering its contribution to the national economy.
He said it contributes 29 per cent to the GDP, 65 per cent of Tanzania’s employment, 65 per cent of industrial raw materials and 30 per cent of export earnings.
Justine said he believed in the last three years TADB’s impact had been felt by producers of cereals, cash crops, livestock and fish farming.