Foreign currency loans for farmers

Judith Phiri, Business Reporter

THE Bankers Association of Zimbabwe (BAZ) has reaffirmed its commitment to financing of the agriculture sector through the availing of foreign currency loans for farmers to help boost the industry.

Last month, the Reserve Bank of Zimbabwe (RBZ) and executives of local banks held a series of crisis meetings with the view of finding a lasting solution to the liquidity crunch which can potentially hamper the upcoming summer cropping season.

Top officials from the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development, were also part of the crucial meetings and it is understood that agriculture funding topped the agenda. BAZ chief executive officer (CEO) Mr Fanwell Mutogo said banks could not afford to ignore the agriculture sector.

“Agriculture is the backbone of the Zimbabwean economy, and thus, banks cannot afford to ignore the sector. Admitted, we currently have liquidity constraints in the market and the late financing of the agriculture sector could throw the season preparations into disarray, resulting in subdued output,” said Mr Mutogo.

Despite the liquidity crunch, he said banks had an option to lend in United States (US) dollars where there is evidence that farmers will get US dollar income from their produce. Mr Mutogo said there was a need to quickly come up with a solution as agriculture remains the mainstay of the economy as if the delays continued this could have severe consequences to other industries like the manufacturing sector.

Most self-financing farmers usually have to borrow some of the money they needed for seed, fertiliser, power and water charges, with CBZ and AFC Holdings being the main lenders.  Zimbabwe Farmers Union (ZFU) secretary general Mr Paul Zakariya, however, bemoaned the high interest rates of loans given to farmers.

“Farmers do have access to loans but the main challenge is high interest rates and usually negotiating to have them reduced does not always work out. The option to get loans in US dollars is welcome but the challenge for farmers will be to repay them as most of the money they get from selling their produce is in local currency,” said Mr Zakariya.

He also called on the Government to consider making full payment to farmers in US dollars so that it becomes easier for them to service their loans if they acquire them in foreign currency.

Echoing the same sentiments, Zimbabwe Commercial Farmers Union (ZCFU) chairperson for Matabeleland region Mr Winston Babbage said coupled with high interest rates, the payment period for bank loans to farmers was short.

“The payment period is too short for farmers, usually banks give them up to 12 months to repay. This then affects farmers because farming is a business that takes times and the interest rates are not so conducive,” said Mr Babbage.

Meanwhile, with high input prices characterising much of the preparatory phase for the 2022/23 cropping season, ZFU, has called on their members to consider creating their own seed banks and developing alternatives to chemical fertilisers.

Mr Zakariya said such a move would bring sustainability to farmers’ operations, adding that seed and chemical fertiliser prices had remained on the high side with the new season fast approaching. An analysis of agro-input prices revealed that seed and fertilisers accounted for over 60 percent of total maize production costs for a one-hectare plot.