EDITORIAL: Financial players should consider alternative agriculture financing approaches

Agriculture sector has become one of those economic opportunities that while most think there exists opportunities, few are willing to play in them. This is true especially among financial sector players.

Despite awareness of the multiple opportunities therein driven by population growth and the opening up of new markets across the world, the agriculture sector in Rwanda like everywhere else across the continent has been too risky for the financial players’ investments and loans.

 

Some of the reasons for hesitance are somewhat valid, little to no data, reliance on rain and traditional methods as well as little if any innovation.

 

In other instances, some financial players cited the low insurance penetration in the sector as a red light in fear of non-performing loans.

 

However, even with the financing odds stacked against the sector, farmers have continued to have somewhat decent volumes of produce with some even managing to score international markets while others have set up small agro-processing plants to add value before putting their produce on the market.

Locally and globally, the market for agriculture produce continues to grow by the day buoyed by industrialization, urbanization and population growth. However the growth of output from the agriculture sector has not been proportional to its demands which could eventually lead to food insecurity cases or even worse massive price hikes as demand will be higher than supply (economics 101).

While some of the reasons for the financial sector’s hesitance may be valid, there is no certainty that the factors that hold them back from entrance will be different soon. Waiting for the sector to adopt technology or modernize could be as long as the wait for eternity all the while the food security time-bomb continues to tick.

Among the ways to turn around the model is introducing new financing models for the agriculture sector that will improve the outlook of the sector.

Among the ways is co-investing with farmers cooperatives where the financiers too have a stake and can provide insights to project management on a more long term basis as opposed to only lending to the few farmers who meet eligibility requirements.

As local financiers seek avenues to financially include more members of the public especially in rural areas, the answer partly lies in working with the target groups to improve their livelihoods.

Rwandan financiers especially banks might want to look into long term investment models to transform small subsistence farming projects into medium or large farming projects with sizable investments that will allow for adoption of technology and modern techniques.  Not as charity but as long term investment projects the way they have other sectors such as technology, hospitality and education among others.  In the process they will play a role in shaping the sector into what they feel has been lacking over the years.

editor@newtimesrwanda.com

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