Online Reporter
Africa Moyo and Edgar Vhera
AFC Holdings has secured the right to manage a US$9,6 million line of credit aimed at supporting eligible participants in the agricultural value chain.
Dubbed the Smallholder Agriculture Cluster Project (SACP), the fund is US$64 million but AFC will execute US$9,6 million.
The fund will directly benefit 78 240 low-income households across five targeted provinces in Zimbabwe.
The SACP is a six-year development initiative collaboratively funded by the Government, the International Fund for Agricultural Development (IFAD) and the OPEC Fund for International Development (OFID).
Its primary objective is to transform smallholder agriculture through private sector-led value chain development.
The project will be operational in Mashonaland Central, Mashonaland East, Mashonaland West, Matabeleland North and the Midlands. It will also enhance equitable participation among smallholder farmers in market-oriented and climate-smart value chains.
Through this fund, rural households will be enabled to sustainably increase their income in both irrigated schemes and adjacent rainfed areas supported by the initiative.
“The project will directly reach 78 240 low-income households as beneficiaries, with an additional 396 400 indirect beneficiaries across 428 wards in 18 districts of the targeted provinces,” said the AFC in a statement.
The initiative is expected to support a minimum of 800 Agricultural Producer Groups (AGP), averaging 30 members each, along with 200 rural micro and small enterprises and 40 Value Chain Lead Enterprises.
These enterprises will provide essential services to the APGs on a contractual basis.
The Reserve Bank of Zimbabwe (RBZ) will act as the line of credit manager, lending to eligible financial institutions that will then extend loans to SACP beneficiaries.
So far, AFC is the only participating financial institution (PFI). PFIs are required to comply with specific loan product features agreed upon with RBZ and SACP to ensure that the financial products cater to the needs of the target groups.
Loans provided under this initiative can be used for either working capital or capital expenditures, aligned with approved business plans. All loans will be denominated in US dollars and must be repaid in the same currency.
The maximum tenure for working capital loans will be 12 months, while capital expenditure loans can extend up to 36 months.
AFC has set the maximum interest rate for end borrowers at 7 percent per annum, calculated on a reducing balance basis.
Importantly, the interest rates will remain fixed throughout the loan tenure, allowing for better financial planning.
PFIs are not allowed to deduct interest upfront; they may collect interest on a monthly or quarterly basis. To ensure financial inclusion, PFIs are encouraged to assess the viability of projects when disbursing loans. They should also consider alternative forms of collateral, such as movable assets or group guarantees.
This approach aims to provide affordable funding to final beneficiaries.
To minimise the risk of fund misuse, PFIs must implement robust monitoring and mitigation measures to prevent fund diversion.
Whenever possible, funds should be disbursed directly to suppliers of inputs and services, ensuring that the support reaches the intended beneficiaries effectively.
Through this initiative, AFC Holdings aims to empower smallholder farmers, improve agricultural productivity, and support rural economic development in Zimbabwe.
