AS the 2016/17 farming season draws closer, it is refreshing to note that some banks have committed themselves to continue availing funds towards the agricultural sector while discussions over the use of 99-year leases as collateral continue. The 99-year leases have been a bone of contention between farmers and banks, with the latter holding back on advancing loans in the absence of bankable collateral, to the detriment of the sector.CBZ Holdings head of agribusiness Mr Cordiad Munemo told delegates at a Zimbabwe National Chamber of Commerce breakfast meeting on Wednesday that while stakeholders were still negotiating over the bankability of the 99-year leases, his bank would provide funding for viable projects despite the absence of collateral.
Agribank official Mr Divine Ngwenya also said while negotiations on the bankability of the 99-year leases were progressing, the bank would continue financing the sector.
Such private sector participation will certainly go a long way in bridging finance gaps in the sector and also complement Government efforts in improving productivity.
Recently, Government launched command agriculture with a target of financing 400 000 hectares of the maize crop.
The programme is expected to produce two million tonnes of maize, which would drastically cut the food import bill or eliminate it.
The Government will also continue running the Presidential Inputs Support Scheme.
Zimbabwe is an agro-based economy and a thriving agriculture sector will have positive impact on other economic sectors, particularly the manufacturing sector as 70 percent of raw materials used in the manufacturing sector come from the agricultural sector.
As such, financing of agricultural sector by the commercial banks is critical.
Worldwide, the business of financing agriculture is largely done by banks.
While Government has done extremely well since Independence in 1980 to finance agriculture with help coming from banks and development partners, the sector remains largely underfunded despite its strategic importance to the domestic economy.
Government estimates that agriculture, which accounts for roughly 16 percent of Zimbabwe’s gross domestic product, requires over $2 billion in funding support annually.
Admittedly, banks have made significant contribution towards efforts to drive agricultural production and attaining Government’s targets under the Zim-Asset Food and Nutrition cluster, lack of collateral continues to constrain the sector’s full potential.
Given banks’ concerns on the acceptability of 99-year leases as bankable security, we feel some bank’s will still have strong reservations about lending to farmers who require financial support the most, which limits productivity of mostly resettled farmers.
In light of this scenario, it is critically that Government and banks expedite the process of resolving areas of difference to the land titles so that thousands of resettled farmers gain access to funding to effectively utilise their farms.