Lack of financing crippling agric sector, says minister

The agriculture sector is lagging behind partly because many banks do not finance it, Dr. Agnes Kalibata, the Minister of Agriculture and Animal Resources, has said.
Banks do not lend to farmers because the say the sector is too ricky. The New Times / File photo
Banks do not lend to farmers because the say the sector is too ricky. The New Times / File photo

The agriculture sector is lagging behind partly because many banks do not finance it, Dr. Agnes Kalibata, the Minister of Agriculture and Animal Resources, has said.

Kalibata said though banks gain a lot from farmers, they were not extending them credit to improve their enterprises.

“A lot of money comes from the rural areas into the banking system, what is being given to these people is negligible?” Kalibata noted while addressing a panel of US researchers in Kigali recently.

She said because of this financial imbalance, farmers were finding it hard to acquire fertiliser loans, irrigation equipment and water harvesting tanks as well as modern agricultural technologies.

“Subsistence farming has persisted because farmers cannot afford agricultural technologies to enable them produce on a large scale. This is where banks should come on board and provide funding,” she said.

Kalibata also noted that guiding farmers on what they should produce and establishing potential markets and policy based on research, were the best approach to boosting productivity. She added that taking services closer to farmers would also enhance productivity.

“Farmers won’t trust you unless you have assured them of markets and better prices for their produce,” Kalibata challenged researchers.

The minister noted that information building among farmers was vital in the drive to increase farm production. She cited the development of information systems using mobile phone-based technology to help farmers access critical agricultural information on their cell phones. 

She revealed that through the government’s Crop Intensification programme (CIP) some of these challenges would be addressed to improve the situation.

According to Suri Tavneet, a career development associate professor of applied economics at J-PAL Research Institute, improving agricultural practices that would result into high yields, better prices, lower risk and enhanced technologies could raise 85 per cent of rural Rwandan households.

Dr. Tavneet was presenting a paper on improving Rwanda’s agricultural productivity in Kigali recently. He observed that giving farmers agricultural loans at harvest time was useless as the money would most probably be used for other activities, thus affecting productivity.

“Problems with saving money and untimely loans coupled with human tendencies of impatience curtail farmers’ efforts to invest in improved technologies and instead channel it into other activities. Buying inputs would not be a priority during harvesting time. Therefore, it’s imperative that they get loans at the right time.”

However, Innocent Bulindi the CEO of Business Development Fund, argued that banks do not lend to farmers because most of them operate on a small-scale, making it hard for them to repay the loans. “Agro-lending faces a lot of challenges…some farmers have good projects but lack collateral, others have collateral but lack good projects. As a lender, it becomes hard to support them,” Bulindi explained.

 

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