Last week, the East African Exchange (EAX) signed agreements with two commercial banks; Banque Populaire du Rwanda and Ecobank, to finance farmers organised under co-operatives.
This initiative will benefit over 5,000 farmers, mainly grain – maize and bean - growers in Kayonza and Rwamagana districts, Eastern Province, under the EAX warehouse receipt system. Under the system, farmers deposit produce with EAX and are issued receipts which they can use as collateral to get loans from banks.
The EAX/Banque Populaire du Rwanda and Ecobank partnership challenges other commercial banks to review their policies and support the sector; two banks cannot go it alone.
Most commercial banks do not extend loans to the agriculture sector, arguing that it is too risky. The deal should be an incentive for other farming co-operatives to use all avenues at their disposal to secure capital instead of lamenting all the time about lack of funds to expand or sustain their farming activities.
It would be advisable if farmers in the country joined the EAX warehouse receipt system to access affordable loans and expand their farming projects.
It is worth noting that by selling their produce through the commodity market’s Nasdaq platform, it gives farmers’ co-operatives more bargaining power and assures them of better prices. It also keeps unscrupulous middlemen or challenges associated with lack of storage facilities at bay since all the grain would be kept in EAX’s warehouses across the country.
Only farmers using the warehouse receipt system operated by the commodities exchange can benefit from the programme, but they have to ensure business discipline in order to gain from the initiative.
The issue of an agro-bank should, however, not be forgotten because of this partnership. And since the agriculture sector employs 80 per cent of the Rwandan population, it needs all our support.