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How loans stimulate agribusiness for smallholder farmers

How loans stimulate agribusiness for smallholder farmers

THE Ministry of Agriculture has approved the revenue and expenditure budget amounting to 751 billion shillings for the financial year 2022/2023 with 81% of the budget to be spent on agricultural development projects.

The Minister of Agriculture, Hussein Bashe said that in addition to the ministry’s many initiatives, the ministry has also increased the capital of the Tanzania Agricultural Bank (TADB) from 60 billion shillings in 2021 to 268 billion so that they can use the money to loan farmers so as to make agriculture more productive.

Furthermore, the government has asked commercial banks to reduce their interest rates on agricultural loans from 17 percent to 9 percent to enable farmers have easy access to finance. Most of the decisions undertaken so far by the government on easing agro financing is meant to commit itself in implementing Malabo declaration which calls for economic growth and poverty reduction by accelerating agricultural growth by 10 percent by 2030.

The sector employs about 81 percent of Tanzanians in the entire value chain. According to information available on the ministry’s website, agricultural sector contributes about half of the GDP where three-quarters of the exports come from agriculture.

Agriculture is linked to non-agricultural sectors by providing raw materials for various industries, including agroprocessing, consumption and export. Nyakitoto Youth Development Project Coordinator, Ramadhani Joel says that agriculture is the main employer and has great role in eradicating poverty if well managed.

Joel says that one of the biggest challenges in improving the welfare of peasants is how to get the finance for their activities. Many of the farmers are unable to fight poverty due to lack of funds to help them exercise commercial agriculture.

Joel, who is a farmer with a 50-hectare maize farm and a 30-hectare bean farm, says agriculture is a great savior for low-income people but they need to get loans to meet basic and technical needs in their farm work.

“Many farmers still do not have the financial means to manage agriculture, especially buying inputs. The truth is that many do not have the collateral needed to get finance. They live on subsistence farming despite great opportunities in agriculture that can alleviate poverty,” says Joel.

The Private Agricultural Sector Support Trust (PASS) which is a facility established in the year 2000 in order to stimulate investment and growth in commercial agriculture and related sectors, spoke about the vulnerability of the sector when it comes to financing.

PASS says the main challenge here is largely caused by lack of collateral to enable them obtain loans from financial institutions to cater for various activities. PASS Western Region Manager, Ayoub Mbezi says the institute has taken on a major role in helping peasants to secure loans from financial institutions and thus enabling more farmers to revolutionized agriculture.

Commenting on the situation, Mbezi said that 1.7 million smallholder entrepreneurs engaged in the agricultural sector in the country have benefited from credit guarantee by PASS.

The Western Region Regional Manager of PASS said that since its inception in 2000 and since 2008 when it started providing credit guarantee services to date, 1.4 trillion shillings has been disbursed to these farmers, equivalent to 7pecent of all loans provided by banks to agricultural sector.

Ayoub said that of the funds provided to farmers, PASS has contributed to guaranteeing 31.4 percent of all agricultural sector loans which contributes 26.9 percent of GDP. The PASS official said that a total of 532,798 businesses related to agricultural products and agricultural services have been helped to access funding from financial institutions.

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Author: Correspondent Fadhili Abdalla

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