Kudakwashe Mhundwa and Kumbirai Tarusarira Business Reporters
Food and Agricultural Organisation (FAO) says it has disbursed loans worth US$30 million to finance the country’s agric sector aimed at boosting the production of different crops by small holder farmers.
This comes as commercial funding to the country’s agricultural sector is heavily subdued.
According to studies made by the Zimbabwe Land and Agrarian Network (ZLAN) only 8 percent of farming activities are being financed by financial institutions.
ZLAN indicated that the majority of farming activities were being funded through contract farming arrangements. Zimbabwean farmers have been finding it difficult to access credit from banks because they do not have security.
While the Government has issued 99-year land leases to some small and large-scale farmers, most financial institutions have rejected them. Contract financing models, often criticised by some analysts for being exploitative, have been the most preferred in the absence of consistent credit from local financial institutions.
“From 2016 to date over 36 000 farmers obtained loans worth US$27 111 335 through Zimbabwe livelihoods and food security programme (LFSP) partner finance institution FIs, approximately 76 percent of these farmers were women.
“Through increased income jointly managed by the Food and Agriculture Organisation (FAO) and the LFSP aims to reach 200 000 smallholder farmer households in Mashonaland West, Manicaland, Midlands, Mashonaland central provinces,” said FAO.
Tobacco, for instance currently has 80 percent of its growers being financed under contract schemes. ZLAN said Zimbabwe should look at ways of improving commercial lending to the sector to carry forward the success of the 2016/17 season, which was largely sponsored by the Government.
However, this year the agricultural sector topped on the $1,13 billion non-performing loans (NPLs) acquired by the Zimbabwe Asset Management Company (Zamco), chalking 43 percent of the NPLs.
Farmers have generally been struggling to pay back bank loans, due to challenges associated with bad weather patterns and in some cases poor farming methods.
This has caused banks to be sceptical when lending farmers, with some banking institutions reportedly demanding that farmers should produce collateral or pay slips to access loans. Farmer representatives say the demand for pay slips is preposterous as farmers are not formally employed, a move that prevents them from increasing productivity.