Bankers Association of Zimbabwe said about 60 percent of funding from banks for the 2014/ 15 farming season will go towards tobacco farming as banks believe that tobacco repayment arrangements are markedly more efficient and effective.
Banks are putting various financing schemes for agriculture for the 2014/15 season and will once again play a pivotal role in supporting the agricultural sector.
During the 2013 /14 season, banks availed $620 million towards agriculture financing and as much as $343 million (55 percent) was for tobacco.
BAZ president Mr Sam Malaba told the Commercial Farmers Union annual congress that there is growing preference for cash crop farming particularly tobacco and horticulture by small scale and commercial farmers to grain crops and cotton due to uncertainty in terms of prices and timing of payments.
“There is a likelihood that over 60 percent of the financing from banks will be dedicated for tobacco financing due to reasons highlighted earlier.
“Tobacco is likely to register even higher number of growers for the 2014 /15 season compared to last season, notwithstanding the likelihood of lower prices due to over production and quality concerns,” Mr Malaba said.
He said Government should optimise synergies for agriculture financing and development through private sector partnerships, encouraging private sector agriculture infrastructure investment.
Mr Malaba said Zimbabwe does not have medium to long term funding required in agriculture and the available short term funding is not adequate to meet the myriad financial requirements in Agriculture.
He said over 80 percent of total deposits are demand deposits that are not available for longer term lending.
“Compounding the challenge is the growth of Non Performing loans accounting to 18,5 percent of total banking sector assets and locking as much as $700 million in potential financing which would be financing the productive sectors of the economy.
“Accordingly banks have become more risk averse and have therefore reduced lending, in particular to farmers whilst increasing lending to corporate agriculture,” said Mr Malaba.
He said in order to resolve the problem of limited financial credit to the agricultural sector calls for concerted efforts by all stakeholders including farmers, bankers, Government, non-banking financial institutions to chart collective response to augment the flow of credit to agriculture.