Agriculture bank implores youth to turn to farm

MASATO MASATO

TANZANIA Agricultural Development Bank (TADB), with at least 60bn/- for peasants and youth enterprises, is imploring Tanzanians, particularly the youth, to embrace farming and qualify for the affordable funding.

Gladly, youth have lately exhibited growing interest in agriculture, although limited credit funding and extension services have impeded their enthusiasm to fully explore the immense business opportunities in the sector.

But, the state owned bank says it is determined to invigorate the country’s ailing agricultural sector, which has long been stifled by underfunding and low productivity.

Former President Jakaya Kikwete launched TADB in Lindi Region last August, challenging it to devise strategies to reach small and collateral challenged peasants, who however account for the large part of agricultural produce in the country.

Hardly eight months, the bank has signed the guarantee facility agreement with the Private Agricultural Sector Support (PASS) Trust, which will provide collaterals for the bank borrowers. Under the deal, which the two partners inked in Dar es Salaam last week, the bank seeks to reach most, if not all, of the needy entrepreneurs in the agriculture sector.

“We invite farmers and other players to apply for credit facilities for agricultural development projects in the priority value chains under this guarantee arrangement,” TADB Managing Director Thomas Samkyi said at the agreement signing ceremony.

The agriculture bank, the first of its kind in the country, has started with a 60bn/- seed capital, amid the government promise to raise it to 800bn/- in five years, to commercialise the sector, which is widely touted as the country’s economic backbone.

The bank’s key objective, according to Finance and Planning Minister Philip Mpango, is to ensure the country’s food security and transform the sector from subsistence to commercial farming through empowering peasants.

“The bank, in the 2016/17 fiscal year, is determined to work closely with the Tanzania Merchantile Exchange to connect farmers to reliable markets,” Dr Mpango said in Dar es Salaam last week while unveiling the government proposals for the 2016/17 national development plan.

TADB and PASS have agreed to promote lending to agriculture through risk mitigation, with special focus on smallholder peasants, medium and large scale farmers as well as other stakeholders in the agricultural value chains.

Eligible beneficiaries of the credit guarantee include farmers and other entrepreneurs in the agriculture value chains--agricultural producers, agro-processors, storage facility constructors, irrigation technology providers and other agriculture infrastructure developers. TADB borrowers will get the PASS guaranteed loans at relatively low rates of between seven and 12 per cent, against the commercial banks’ rates of up to 25 per cent.

Yet, majority people still disregard agriculture as the preserve of the old and illiterates in rural areas. “TADB is determined to modernise the (agriculture) sector and make it the educated youth’s first choice,” says Mr Samkyi, arguing that the bank offers the lasting solution for the financing problem that has been haunting youth in farming activities.

Even graduates, fresh from university without the required collateral at their first engagement in agriculture, need not worry about qualifying for the credit facilities.

“Under our agreement with PASS, the collateral issue is well taken care of...all we look for are bankable projects,” says TADB chief. After all, lending to agriculture, according to PASS that puts its loan recovery rate at 95 per cent, is not that risky.

“The common perception that agriculture sector is not credit worthy is a myth,” says PASS Managing Director Nicomed Bohay, dismissing as unfounded, claims that funding to agriculture is risky.

The trust that operates as service provider between agriculture and financial sectors has so far guaranteed 314bn/- loans to the sector, with 95 per cent of the amount recovered, he says. The vivid problem, it seems, is the low turnout of applicants for the guarantee.

Mr Bohay notes with concern that the PASS managed Credit Guarantee Fund remains underutilised by 75 per cent. TADB becomes the 10th bank to partner with PASS, which is already working with CRDB Bank, Amana Bank, Akiba Commercial Bank, Exim Bank, TIB Bank, FBME Bank, National Microfinance Bank, ACB Bank and BOA Bank.

Tanzania and Danish governments founded PASS under DANIDA funding in 2000.

It operated as a project under the Agricultural Sector Programme Support until 2007 when it was registered as a trust, not for profit organisation, to help commercialisation of subsistence farming. And, in last year alone, the trust invested 56bn/- in the sector in support of crop production, input supply, irrigation, tractor purchases, agro-processing, crop trading and transportation.

President John Magufuli has severally promised job creation through conducive environment for entrepreneurs to invest. The TADB/PASS agreement is indeed one of the opportunities that avail to Tanzanians limitless prospects to generate wealth from the farm.