The issue of high rates and lack of collateral demanded by banks before they issue loans to farmers will soon be history thanks to a deal reached with 450 microfinance institutions, according to the Chief Executive Officer of the Business Development Fund, Innocent Bulindi.
BDF is an independent government entity established in collaboration with the Development Bank of Rwanda (BRD) to implement the “Access to Finance” objective.
Bulindi told journalists last week that BDF is working to invest in rural farming and to develop different finance mechanisms that can help solve funding challenges.
“The biggest issue that farmers have is that they do not have collateral and this really blocks them from getting access to loans. There is also the issue of high interest rates which affects them in terms of buying inputs like fertilisers. We have come up with innovative financing products to help them to access what they need at the right time. We have signed contracts with more than 450 microfinance institutions from all over the country to refinance rural agriculture,” he said.
Bulindi said that, currently, BDF is focusing on their rural investment facility, promotion of income through exports and post harvest programmes.
“We have a guarantee programme where we provide guarantees on all levels of agriculture, from production to processing, generally the whole value chain. We manage a couple of grant programmes in partnership with the Ministry of Agriculture, all aimed at reducing the burden of high interest rates and to build confidence of financial institutions to invest in agriculture,” he said.
He cited adverse weather in areas in the Eastern Province and floods in Gakenke, saying they presented serious challenge to borrowing after devastating harvests.
“Those are real risks that have affected small holder farmers and these bring about losses to financial institutions that have invested. That’s a risk that is being addressed by different players who have come up with the weather index insurance programme,” he said.
The CEO of Rwanda Development Bank, Alex Kanyankole, said due to such unforeseen risks and calamities, some institutions had resorted to re-negotiating the payment plans.
“We talk to these farmers and, for example, say that the season wasn’t good and you did not get all the projected output, you do not have the capacity to pay back the loan according to the schedule that we had with you, but here is a proposal. Maybe we do it long term, so that in the forthcoming seasons, if the harvest is better, then you can repay,” he said.
He added that the government was trying as much as possible to introduce different irrigation systems to avoid dependence on rains.
“The government is working hard to come up with comprehensive irrigation systems so that at least there is some crop water that is needed even in times of dryness. It is still a challenge in many African countries as we continue to face the impacts of climatic changes globally,” he said.
Players in the agriculture sector, including financiers, are due to meet today in Kigali for a three day international conference about sharing best practices and experiences.