Farmers with bankable projects stand a chance to win funding under a Dutch-funded project, “Linking farmers to markets (LFAM), which was launched last week. The initiative will also benefit agro-dealers and processors, according to Dr Livingstone Byamungu, the LIFAM national co-ordinator.
Byamungu said beneficiaries will be selected through a contest involving farmers, dealers and processors, with the winning projects receiving up to 10 per cent total loans after banks have approved their business plans. The funding (10 per cent) is expected to help farmers unlock business opportunities in the agriculture sector and spur its growth to ensure sustainability.
Byamungu explained that the 10 per cent is top up for only those business plans that have been approved by commercial banks with the first phase of credit dispatched.
He was speaking during the launch of the 2016 agri-business competition in Rutsiro District in Western Province.
LIFAM, an initiative of the Private Sector Federation (PSF), seeks to increase access to credit by farmers, processors, and agro-dealers to boost the sector’s productivity.
Byamungu said winning projects would get up to Rwf5 million from LIFAM.
Christine Murebwayire, the chairperson Chamber of Agriculture at PSF, believes the initiative will help raise private investments in agriculture sector and strengthen its contribution to economic growth.
The sector grew by 5 per cent in 2015 and contributed about 33 per cent to the national GDP. Experts have urged government and stakeholders to increase investment in the agriculture to make it more sustainable. This could help enhance the sector’s production and farmers’ income.
Push banks to cut rates
Commenting on the reluctance by banks to fund agriculture, Patrick Nahimana, a fish farmer in Rutsiro District, said government should push financial institutions to increase loans to the sector. Nahimana said banks could also be encouraged to reduce interest rate on agro-loans so that the sector becomes competitive and profitable.
Government recently shelved plans to set up an agriculture bank, arguing that such a venture is costly, and that there are already alternatives in place, including SACCOs.
Finance and Economic Planning Minister Amb Claver Gatete said such projects require, not only registering the institution, but also setting up other branches across the country, which is costly. “We are urging farmers to use the already existing banks to access credit to fund their agriculture activities,” Gatete said in an earlier interview with The New Times.
However, farmers like Alfred Sibomana from Karongi District, believes the lack of an agriculture bank encourages commercial banks to continue charging farmers exorbitant interest rates.
“You can’t leave farming at the hands of commercial banks or SACCOs whose main interest is to make as much profit as possible,” Sibomana said.
Though the agriculture industry employs 72 per cent of the Rwandan population, it received a mere 1.9 per cent of total loan portfolio last year. However, this was an increase from 1.3 per cent in 2014. The sector has received a mere 4 per cent of the total loan portfolios from commercial banks for the past many years.
Close to half of the total loan applications were rejected during the year. According to central bank statistics, the loan rejection rate was at 49 per cent in 2015. In 2014, Fifty-eight per cent of the loan applications by farmers were rejected. Banks charge up to 18 per cent interest rate per annum on agriculture loans.
Encouraging other alternative sources of funds
Meanwhile, Isaa Bembereza, the investment promotion, industry and financial services chief for Rutsiro District, said it is important to encourage other sources of funding, like LIFAM, arguing that this will help address the challenge of access to credit that farmers have been complaining about for years.
“This way, we will move towards achieving the 8.5 per cent growth rate for the agriculture sector by 2018 from 5 per cent presently,” he said.
Bembereza urged farmers to design bankable projects to benefit from the new initiative.