CREDIT FOR AGRICULTURE: MILLIONS OF DOLLARS LEFT UNUSED

Mozambican farmers have barely used a 25 million U.S. dollars credit line opened at the “Standard Bank” by both the government and the Alliance for a Green Revolution in Africa (AGRA). The credit line was opened in June 2010 to boost country’s agricultural sector. This facility has a 2.5 million US dollars guarantee fund supported by the Mozambican government and AGRA, thus farmers are not required to present collateral to access to credit. However, since its inception, this fund has financed only four initiatives totalling about two million US dollars.“So far we have only executed eight percent of the credit, which is very low,” admitted Marcelino Botao, Agro-business manager at the Standard Bank, one of the largest commercial banks in the country.According to Botao, the money was made available late last year, and that could explain the low demand for loans, along with problems faced by farmers to submit the required documentation, including business plans.Problems associated with documentation led to the rejection of 23 projects. Meanwhile, another 12 projects are under review, and if approved they will be implemented in the southern province of Maputo, Manica and Tete both in the central region of the country, totalling eight million US dollars.To address problems faced by farmers in preparing their projects, Standard Bank says it is working with AGRA to help farmers to improve their business plans.To that end, a team of service providers will be established to assist farmers. “Now there are five Mozambican companies funded by AGRA to assist farmers who are willing to submit bankable business plans and thus reduce the rate of rejections”, explained Botao.Interestingly, there are few projects for food production and processing, tough that was one of the objectives when this credit line was opened. Indeed, only one of the four projects now funded was designed to grow food crops such as maize, beans and sesame in the northern province of Nampula.In a relate development, president of AGRA, Namanga Ngongi, urged African governments to create adequate conditions and favourable environment for financial institutions to invest in agriculture, despite the risks involved. Currently, African farmers face serious difficulties in accessing bank loans.According Ngongi, across the African continent, where nearly 80 percent of the population depend on agriculture, only two percent of bank loans are granted to the agricultural sector.