Zimbabwe: Agribank Struggles to Disburse Loans

Source from:  The Herald (Harare) 24 November 2007 11/26/2007

THE Agricultural Development Bank of Zimbabwe is stuck with funds meant to benefit farmers because it does not have adequate personnel to cope with the overwhelming loan applications. According to a report released by the Parliamentary Portfolio Committee on Agriculture, the Government allocated Agribank $61,439 billion before the Supplementary Budget. "As of end of August 2007, only $21,439 billion had been disbursed, leaving a balance of $40 billion. Your committee was very worried about this low up-take rate of loans," read part of the report. "The Agribank Chief Executive (Mr Sam Malaba) said the slow processing of applications by his bank was mainly due to inadequate frontline personnel to do work on time given the overwhelming applications that the bank receives each agricultural season." However, farmers' unions have accused the bank of attaching stringent requirements on loans, making it difficult for farmers to borrow. "Farmers' unions, on the other hand, said the low up-take rate was due to insistence by Agribank and other financial institutions on collateral security and the requirement by banks for farmers to raise 50 percent of their total requirement before they could access bank loans. "They said these stringent requirements have become a hindrance to many farmers because they do not have the means to meet the criteria set by financial institutions," added the report. In the report, farmers appealed to the Government to review the policy stipulating banks to demand collateral security and to relax other stringent conditions to enable them to access the loans on time. Responding to issues raised by farmers, the Ministry of Agriculture said banks had their own internal lending regulations. It explained that financial institutions were trying to ensure that funds were advanced to serious farmers who would use the loans productively as opposed to speculative tendencies "as has happened in the past". The report noted that through the Supplementary Budget, the bank received $80 billion for tobacco under the Public Sector Investment Programme and $960 billion for grains. The $960 billion funding was to be administered by Agribank and Operation Maguta. "Your Committee was further told that funding required under the Agricultural Sector Productivity Enhancement Facility for the 2007/8 agricultural season was to the tune of $3,5 trillion," the report said. Asked why strategic crops like sugarcane were not being funded as well, the report said Mr Malaba indicated that funds from Government were crop and region specific. It said sugarcane was not included in the list of crops to be funded. Mr Malaba, however, said efforts were underway to have sugarcane, cotton, coffee and tea allocated funds through the National Budget. "Bids to that effect had already been submitted to the Ministry of Finance," the report noted. There are two sources of Government funding for agriculture, namely the PSIP and ASPEF. The PSIP caters for smallholder farmers who generally do not have a sound capital base and these are A1 farmers, old resettlement farmers, communal farmers and small-scale commercial farmers. ASPEF funding is handled by the Reserve Bank of Zimbabwe and targets large commercial farmers and A2 farmers. The PSIP scheme targets mainly strategic food crops such as maize, wheat, small grains, and livestock production. Small-scale tobacco farmers are also assisted under this scheme. ASPEF is meant to assist farmers involved in cash crops like tobacco, soya beans, sugar beans, horticulture and wheat. Enditem