Traditionally, commercial banks have shunned financing agricultural projects due to perceived high risks associated with rain-fed farming, where harvests depend entirely on weather conditions.
This, however, should no longer be an issue because as we talk about commercial farming, we should be investing in taming the weather to allow farmers produce throughout the year.
That is where financial institutions should come in; to fund projects that bring about real shift from traditional rain-fed peasant farming to mechanised and all-weather commercial agriculture.
Banks should therefore see opportunities in funding equipment such as irrigation, tractors, processors and greenhouses to facilitate increased production for domestic and export markets. They should also not under look funding modern storage facilities to reduce post-harvest losses.
For now, the private sector and in particular banks, cannot afford to relegate agriculture because any foreseeable potential for economic growth will come from the sector—be it exports, manufacturing, hunger and poverty eradication or even ensuring macroeconomic stability.
In fact, one of the biggest challenge to macroeconomic development for any economy is managing inflation (or price stability). Yet the greatest determinant of price stability in developing economies, as any economist will attest to, is food supply.
For an import-based economy that Rwanda is, and therefore susceptible to imported inflation, we cannot afford to compromise on food and cash crop production. To do so means adding food onto the long list of imports and this has broad implications on our widening trade deficit.
Banks must therefore look at the challenges in the sector simply as such, and work round them to create opportunities. After all, banks also have a big stake in a stable economy as well as a health, well-fed and prosperous population.