Farmers have for long complained about lack of access to finance, a situation that’s partly blamed for the sluggish growth of the agriculture sector. However, a partnership between the East African Exchange and some commercial banks, which will see farmers access short-term loans, could provide some relief to the sector.
The initiative, to work under EAX’s warehouse receipt system, will significantly ease access to agro-finance to this market segment that has been ignored for long. Most banks consider farming as a very risky business and, therefore, ignore it preferring to lend to “less” risky ventures. This has always attracted incessant complaints from farmers, but to no avail.
The EAX initiative is a challenge to other stakeholders and government to extend more support to the agriculture sector to make it more productive and sustainable. EAX has partnered with Ecobank, Bank of Kigali and Banque Populaire du Rwanda, among others, to finance farmers in Kayonza, Bugesera, Rwamagana and Nyanza districts. Only farmers under co-operatives will benefit.
The partner banks and EAX should, however, train farmers in the basics of business management so they can benefit from the project. Under the initiative, a farmer will be able to acquire a loan of up to 70 per cent the value of their produce deposited at an EAX warehouse. They will use receipts issued by the warehouse as collateral.
That’s a step in the right direction.