“The common perception that agriculture sector is not credit worthy is a myth,” PASS Managing Director Nicomed Bohay said, dismissing as unfounded the lame excuses of denying funding to agriculture on the pretext that the sector is highly risky.
He said the trust that operates as service provider between agriculture and financial sectors has so far guaranteed 314bn/- loans to agriculture, with 95 per cent of the amount recovered.
Mr Bohay, speaking at the signing of the guarantee facility agreement between PASS and Tanzania Agricultural Development Bank (TADB), invited more Tanzanians to explore business opportunities in agriculture to qualify for the affordable funding under the arrangement.
“All the commercial banks, which we work with haven’t been able to exhaust the financial resources available,” said Mr Bohay, hinting that the PASS managed Credit Guarantee Fund remains underutilised by 75 per cent.
TADB and PASS have under the agreement embarked on the promotion of lending to agriculture through risk mitigation, focusing on smallholder peasants, medium and large scale farmers as well as other stakeholders in the agricultural value chains.
TADB Managing Director, Thomas Samkyi said his bank was determined to work with low fee charging guarantee partners like PASS, saying high costs of agriculture production requires cheap funding, “If the guarantees costs are high, the overall financing cost increases, making it difficult to repay the loans.”
Mr Samkyi said the bank’s focus to youth agriculture enterprises require guarantees as majority of the youth lack the required collateral at their first engagement in agriculture activities.
Eligible beneficiaries of the Credit Guarantees, the bank boss said, will be farmers and other entrepreneurs in the agriculture value chains–agricultural producers, agro-processors, storage facility constructors, irrigation technology providers and other agriculture infrastructure developers.
Mr Samkyi said the bank whose key objective is to catalyse investments in the agricultural sector envisages to issue loans of at least 60bn/- to over 100,000 small peasants, 10 youth enterprises and one big farmer this year at an interest rate of between seven and 12 per cent.
“TADB invites farmers and other players to access the credit facilities for agricultural development projects in the priority value chains under this guarantee arrangement,” said Mr Samkyi, reaffirming his bank’s tenacity to work with other strategic partners to promote interventions aimed at transforming the agricultural sector.
TADB becomes the 10th bank to partner with PASS, which is already working with CRDB Bank, Amana Bank, Akiba Commercial Bank, Exim Bank, TIB Bank, FBME Bank, National Microfinance Bank, ACB Bank and BOA Bank.
Tanzania and Danish governments founded PASS under DANIDA funding in 2000. It operated as a project under the Agricultural Sector Programme Support until 2007 when it was registered as a trust, not for profit organisation, to help commercialisation of subsistence farming.
The trust invested 56bn/- in agriculture last year alone, in support of crop production, input supply, irrigation, tractor purchases, agro-processing, crop trading and transportation.