The Government is set to establish a fund to address challenges faced by farmers such as unfavourable loan terms by financial institutions, and high interest rates.
The banks will advance loans to farmers following agreements signed between the Ministry of Agriculture and the banks, said Dr Octave Semwaga, the director-general of strategic planning and programmes coordination at the Ministry of Agriculture and Animal Resources (MINAGRI).
Semwaga was speaking last week during a consultation workshop on the fourth Strategic Plan for the Transformation of Agriculture (PSTA IV).
The new six-year plan, which will be implemented between 2018 and 2023, will serve as the nation’s primary blueprint for guiding public investments in the agriculture sector.
According to MINAGRI, food security in Rwanda stands at about 80 per cent, with targets to achieve 100 per cent under the new plan, and be able to export the surplus.
“You know the problems that exist in the agriculture sector. You bring your project to a financial institution and they tell you to come back in two weeks because they treat it as any other project. But, once we have set up the fund, they will work under the agreement reached between you (farmers), and them (financial institutions),” Semwaga said.
He said the Government was still discussing how money can be put into the fund.
Mining and agriculture were the two least financed sectors in 2016 with 0.1 and 1.8 percentage share of total 1,407 billion bank loans, respectively.
Loans to agriculture declined by 4 per cent from Rwf29.8 billion in 2015 to 28.6 billion in 2016, according to the Monetary Policy and Financial Stability Statement released in February 2017 by the National Bank of Rwanda.
The share of mortgage loans was the highest – 34.7 per cent – of 10 sectors financed in December 2016; followed by commercial and hotels loans with 32 percent share.
Thanks to the proposed fund, Semwaga said, preferential financing treatment will be given to agricultural and livestock projects.
“If you multiply seeds, it might take you about six to seven months to get yield. Normally, a farmer is told to start paying loan the next month. That is the issue we want to address. We will sign agreements spelling out that the beneficiary farmer should pay when they have harvested their produce,” he said.
Recently, the president of the Federation of Potato Farmers’ Cooperatives in Rwanda (FECOPPORWA), Vincent Havugimana, told The New Times that the current loan system was not friendly to farmers as a farmer has to repay loans on a monthly basis, yet they get money after a season (about four to six months).
“We want to service loans at the end of a season. That can help us plan and repay the loan after selling our produce,” he said.
Also, farmers made a case of high interest rates which range from 16 per cent to 19 per cent, calling for affordable loans.
Underscoring the importance of the sector, Semwaga said that agriculture has a big role to play in the country’s economy and people’s livelihoods.
Agriculture contributes about 30 per cent to the country’s Gross Domestic Product (GDP), generates about 50 per cent of the country’s export revenues, and employs about 70 per cent of the population.