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 Obert Chifamba
Agri-Insight

LAST Friday, President Mnangagwa officially launched the Agricultural Finance Corporation (AFC) and Land Bank in Harare.

Essentially, the launch could not have come at a better time than the end of a very successful season, which was blessed with abundant rains that set the country on course for a record maize harvest since the fast track Land Reform Programme, with 2,8 million tonnes expected to be delivered to the Grain Marketing Board (GMB).

This development is expected to add impetus to the national economic growth, with more factories poised to start operating and create job opportunities in the process.

Sixty percent of raw materials used in the manufacturing sector are agricultural products, a fact that requires the agriculture industry to be at its best always for the economy to maintain its vibrancy.

President Mnangagwa did not mince his words and challenged the re-structured, re-modelled and transformed Agribank to provide diversified and inclusive financial services to all farmers, corporates and agro-processing entities.

He said in line with its infrastructure development mandate, the Land and Development Bank was also expected to contribute to this cause by providing long-term funding for water harvesting infrastructure and development, among others.

The long and short of it is that the President was advising AFC to avoid following in the footsteps of the then Agricultural Finance Corporation, which was operational in the 70s and retreated into the annals of history in the 90s.

This was a financial institution many will remember as the vehicle on which the few commercial farmers of the time rode on when they conquered the agricultural landscape and made headlines for being organised and well-resourced producers.

Then, the institution had this skewed way of handling farmers’ financial requirements to the extent that large-scale commercial farmers who constituted only three percent of the total AFC loan recipients in the 1990/91 farming season, for instance, accounted for 85 percent of the financial resources extended to farmers. Other farmer categories that constituted the remaining percentage were congested in the outstanding 15 percent.

During that time, stretching from 1980 to 1991, Zimbabwe’s commercial farming sector was serviced by a highly developed and regulated financial system, while the communal sector, that ironically produced much of the food crops that anchored the country’s food security, was inadequately serviced by a poor formal financial system consisting of the AFC credit scheme and building societies, or had to seek loans from informal financial institutions.

Information contained in Zimbabwe’s Agricultural Revolution Revisited documents show that only 16,5 percent of all building society outlets were located in communal lands where 70 percent of the country’s total population resided, with the distribution of commercial banks also following a similar pattern.

Only 14 out of a total of 69 branches, sub-branches and agencies of Barclays Bank, for example, were in rural areas.

The formal financial institutions supporting rural areas consisted of the Agricultural Finance Corporation, the Cold Storage Commission and commercial banks.

The Agricultural Finance Corporation was a public lending institution servicing communal, resettlement, small-scale and large-scale commercial farmers.

The Cold Storage Commission, a beef marketing parastatal, provided loans to all farmers for livestock development.

Commercial banks provided agricultural loans only to large-scale commercial farmers and due to the inadequacy of formal finance in rural areas, a large proportion of financial intermediation took place informally.

According to the document, disparities in resource distribution and agricultural enterprises did not only occur among the various farming groups, but also along regional lines with the most productive agricultural provinces getting the larger share of loan funds.

Out of the then eight provinces of Zimbabwe, Mashonaland West and Mashonaland Central chewed up 57 percent of AFC loans.

History aside, farmers that will access services from the new AFC launched last week must not forget that the institution’s financial resources will need to be replenished every time they are utilised to give it more life and relevance hence the need for them to repay loans they would have taken.

The successful take off of the programme will require farmers to seek funding for projects that are viable across the agriculture value chain with a view to grow exports and agro-industrialisation, which allow them to penetrate competitive global value chains.

Beneficiaries need to do projects that they can successfully run and not take up something because neighbours or friends are doing it, lest they fail dismally, which will not capacitate them to repay their loans within the agreed time frame.

This will naturally see the resources of the institution shrinking and eventually it will not be able to provide the services that farmers so direly need.

Before approaching the bank, farmers need to seek advice either from their extension officers or other farmers doing well in similar projects so that they know exactly what they will be getting themselves into.

They will need to do a land use assessment and see how much potential their soils wield to sustain projects for which they will be seeking financial support.

Banks are businesses that require to always be financially liquid and that is only possible when all clients are fulfilling their part of the deal.

Defaulting on payments has always ended in an ugly fashion, for instance, some farmers using the former Agricultural Finance Corporation ended up losing implements and property after the latter attached them.

On Friday, President Mnangagwa challenged benefiting farmers and citizens alike to develop ‘a strong culture of honouring their financial obligations’ to guarantee the future of financing institutions that would have assisted them.

Of late, there is this tendency by people seeking loans or other specialised services to use untruthful ways to acquire them, for example, they dole out cash to have someone draft project proposals for them to convince lending institutions on the potential or viability of a project if funded.

In most cases, the credibility gap always catches up with such people and they perform dismally to the point of failing to service their obligations, leading to legal disputes whose eventual conclusion always leaves them licking bruised egos, poorer than before.