Limited access to capital remains a critical challenge for people engaged in agriculture, leading to low levels of investment in the sector despite its strategic importance in improving people’s livelihoods.
At the ongoing African Green Revolution Forum in Kigali, it emerged that access to capital is a serious challenge as lenders are hesitant to deal with volatilities associated with Agriculture.
For instance, according to Rwanda Development Board (RDB), agriculture is one of the industries that attract low levels of investment even though it offers multiple opportunities.
In addition, Central Bank statistics show that agriculture received only 1.5 per cent of commercial bank loans in the first half of this year.
While banks call for increased de-risking of the sector to facilitate predictability of returns on investment and reduce losses, players have challenged financial institutions to increase their knowledge of Agriculture to formulate products relevant to its needs.
“Among the changes that are required is improving the level of knowledge among all players, including financial players, community members,” the Minister for Agriculture and Animal Resources, Gérardine Mukeshimana, said.
The minister said that scaling up initiatives such as agriculture insurance would contribute to reducing the levels of unpredictability and volatility.
Other measures proposed by the minister to de-risk the sector include business guarantee funds as well as deliberate support from Government to boost output.
Dr Agnes Kalibata, the President of Alliance for a Green Revolution in Africa (AGRA), said that among the best practices that can help improve access to finance include risk sharing facilities and guarantees working with farmer organisations.
She said that the model has been tested and piloted in parts of the continent such as Nigeria, where it increased the ability to mobilise capital.
Dr Kalibata said that guarantee facilities, first loss guarantees, and risk sharing provisions were possible given the multiple stakeholders and development partners in the sector.
“Going forward, we also have to educate ourselves on the bankability of projects to ensure that proposals are compliant with banks’ requirements. We need to work with farmer organisations to find ways to improve the quality of their projects and have better data to justify credit,” she added.
Other stakeholders say that agriculture in the region lacks proper organisation and coordination, which limits access to capital.
Elizabeth Nsimadala, the President of Eastern Africa Farmers Federation, said that due to the lack of coordination of the agriculture sector and its activities, there lacks an adequate understanding of the economic context, profitability and viability of the sector.
She called for the strengthening of farmer organisations in production and marketing units to improve the quality and scope of data and information that is used to justify financing.
Prime Minister Edouard Ngirente said that the agriculture sector, despite its potential, continues to be held back by many challenges.
Among the main challenges, he said, is the limited use of modern agro-inputs, limited access to finance, weak access to markets, and limited mechanisation.
“Despite enormous potential for agricultural production on continent, Africa still lags behind in terms of agricultural production,” he said.
He noted that to overcome the challenges, there is need to translate the existing strategies into concrete actions.
“In our National Strategy for Transformation, agriculture sector is envisaged to grow by 10 per cent annually. This will contribute to job creation, food security and industrialisation. The Government is committed to working with all partners to ensure its implementation,” he said.
He also called for increased evidence-based planning and accountability in programme implementation or else the continent will continue to lag behind in modernisation of the sector and agro-businesses.