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It seeks to provide funding for smallholder farmers with a view to improving productivity and boosting food security through agriculture. The initiative, unveiled early this month, must be applauded as it has potential to go a long way in boosting our agriculture sector, if small-scale farmers are informed and encouraged to fully utilise it.
Smallholder farmers together with commercial farmers can produce enough food for this country for both their own consumption and to enhance the strategic grain reserve at the Grain Marketing Board (GMB).
Mr Saneliso Mhlanga, a small scale farmer in Matabeleland South who is doing milk production commended the credit facility, saying it is a huge step towards the revival of Zimbabwe farm production and by extension, the economy.
“I understand that agriculture is the largest single source of export earnings in our country, contributing more than 50 percent of exports over the past years. For example, looking back in the years like 1992, tobacco was the biggest foreign currency earner despite the drought.
“The production of tobacco was maintained and it thrives because there was massive financing from the Government,” said Mr Mhlanga.
With 18 dairy cows which supply about 10 litres of milk per cow, Mr Mhlanga views his dairy business as lucrative despite the dwindling rainfall patterns in the region. He said such initiatives like the Create Fund credit facility might help other communal people to initiate life-enhancing projects like poultry.
According to a press release by Sabi Consulting, a Harare-based organisation responsible for managing the credit facility, funds would be lent to agro-dealers, contracting companies, agro-processors, traders, transporters and wholesalers.
Agriculture is one of the country’s key employers and providers of income for between 60 and 70 percent of the population. According to a national analysis of the agricultural sector in 2010, it provides and supplies 60 percent of raw materials required by the industrial sector and contributes about 40 percent of export earnings depending on the rainfall patterns.
The on-lending banks for Create Fund are FBC and NMB. In order to access the credit facility, the eligible applicants have to fill in application forms from these institutions and the on-lending banks will assess the creditworthiness of applicants. Applicants will not be required to have had banking relationships with the (on-lending) banks and this makes it even easier for the smallholder farmers to benefit from the credit facility.
The credit facility will have tenors of between three and 12 months with opportunity to roll over the facility at once. The tenors will be varied on the case by case basis and it will allow an all-in cost of 11,5 percent per annum payable on terms and conditions set out by the relevant on-lending bank. The interest on the all-in cost is a plus for this credit fund facility.
The disbursement criterion of the credit fund however, is left at the discretion of NMB and FBC. The minimum and the maximum disbursements are determined by the banks.
Mr Goodwill Nyoni, a commercial farmer from Matabeleland North, believes that this credit facility is good although the problematic area is the issue of collateral and how much money the banks are going to disburse.
“This is a great funding opportunity for serious agribusiness entrepreneurs like us and I would encourage other smallholder farmers to go for it since business financing is very scarce in our country. The disbursement criterion is left to the mercy of the banks and I hope that it will be favourable because of collateral and security issues,” said Mr Nyoni.
Early this month, ZADT unveiled the $12 million Create Fund to benefit those involved in the agriculture sector’s value chain. The money will be lent through three funding windows — inputs, output marketing and storage processing. Speaking at the official launch, Create Fund manager Mr Herbert Makova said the fund was established after realising the pivotal role of access to credit in the recovery of Zimbabwe’s agriculture and the acute shortage of appropriately priced and structured credit instruments in the financial markets.
“Farmers and agro-dealers lack the capacity to turn their businesses into bankable enterprises in order to access loans,” he said.
“Smallholder farmers also lack fixed property or collateral and Create Fund is providing access to finance and increasing the income for smallholder farmers.”
Mr Makova said the fund provides low-cost working capital support to smallholder farmers by funding to value chain business.
“We have roped in experts in other disciplines, such as banks and SNV-Hivos who have the experience in dealing with farmers in that regard.
“The fund wants to stimulate the relationship between farmers and other stakeholders.”
Mr Makova said under the facility, banks would not demand collateral. By early this month, $3,5 million had already been distributed, with Manicaland province having the highest number of beneficiaries, ranging from input suppliers, processors, contractors and traders.
“We are also going to come up with innovative financial models, collaborating with similar initiatives and also mobilising resources locally, regionally and internationally.
It is generally accepted that if agriculture performs poorly the rest of the economy crumbles; therefore it is ideal to have a proper funding mechanism like the Create Fund so as to enhance productivity in the agricultural sector.
The availing of initiatives like Create Fund can boost productivity and confidence to the smallholder farmers, to be able to take their produce to the GMB so as to have both food and an income from their produce.
* Lungelo Ndlovu is a Bachelor of Science and Honours Degree in Journalism and Media Studies student at Nust. He can be contacted on [email protected]
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