Tanzania outlines policy changes to transform agriculture

Dar es Salaam. The government yesterday outlined its agricultural transformation agenda, detailing its desire to see commercial banks’ lending rate to the sector – which is currently within single-digit levels - dropping further.

Apart from bringing down lending rates further, the government also plans to issue a price stability fund for fertilizer and establish a revolving Fund for agricultural inputs and agricultural development.

The government also plans to review the National Irrigation Commission structure and make some changes and establish a common use facility for packing, sorting and grading of horticultural products.

It also directed the treasury’s office to let off land that is at its hand idle and give it to investors for commercial farming.

For agriculture to attain a meaningful development, the government also requested development partners to channel their aid into agriculture infrastructure, instead of capacity building.

Speaking during the a handover of 6,700 motorcycles to extension service officers, President Samia Suluhu Hassan urged commercial banks to compete by providing a single digit interest rate on loans to the agriculture sector.

She said single digital interest rate is of paramount importance in making loans cheap and hence shaping the agriculture sector and up its contribution to the economy.

Reports have it that the agriculture sector employs over 65 percent of Tanzanians, contributes 27 percent to the Gross Domestic Product (GDP), 60 percent of raw-materials and 25 percent of foreign currency.

“CRDB Bank is already changing a single digit interest rate to nine percent. I am positive NMB Bank, which is currently charging 10 percent, will follow a suit. Will be more than happy if you go to eight percent,” said President Hassan.

She also directed the ministry of Agriculture to establish a Revolving Fund for agricultural inputs and agricultural development.

“At a time when prices for agricultural inputs shoot due to external shocks, the Revolving Fund will be coming in to cushion farmers,” she said, suggesting that the Fund will be bearing the price burden.

Contributors to the Fund will be among others, internal sources of revenue and development partners, the President explained.

Again, President Hassan directed the ministry of Agriculture and President’s Office (Public Service Management) to review the Irrigation Commission structure for it to have offices in each district.

Speaking earlier, Agriculture minister Hussein Bashe said that agriculture stakeholders would not be ready to work with commercial banks which are not ready to change the single digit interest rate.

“It does not hold water for commercial banks making profits out of farmers’ billions of money that pass through them, yet, they are not ready to issue low interest rates,” he said.

“We will deal with the banks that are ready to work with us. I mean business and this is our position.”

Mr Bashe called on the President to provide some Sh150 billion to commercial banks to be used as security for farmers.

“I humbly request you President to give us Sh150 billion out of Sh1 trillion that has been injected into BoT (Bank of Tanzania) for the agriculture sector. We want to use it as the security for fertiliser subsidies with effect from the next harvest season,” requested Mr Bashe.

This, he expounded, will reduce the hike in price burden that farmers were currently going through.

According to Mr Bashe, prices of fertilisers in the global market had flown by 300 percent and thus leaving pains to farmers, putting blame on the Covid-19 pandemic and the ongoing Russia-Ukraine war.

In a swift rejoinder, President Hassan said she would discuss with the Bank of Tanzania (BoT) governor on how to handle the matter in question.

On horticulture, he said, growing at an average of between 7 and 11 percent annually, it was the fastest growing sub-sector in the agriculture sector.

Yet, it was facing a number of challenges, with one of it being logistic issues.

“To address the challenge, we are planning to establish a common use facility for packing, sorting and grading so that they can be exported in the name of Tanzania,” said minister Bashe.

Meanwhile, with a view to reducing a challenge of shortage in cooking oil, the minister called for the Finance Ministry to reduce import duty while at the same time, factories undertaking double-refinery of the product be charged zero rate.

Going by the official data, demand for cooking oil in the country stands at 650,000 tonnes per annum compared to the production capacity of 250,000 tonnes.

This suggests that the country is facing a deficit of 400,000 tonnes.

Tanzania Bankers Association (TBA) chairman Abdulmajid Nsekela expressed commercial banks’ commitment to addressing the challenge of access to capital that farmers were grappling with.

He said currently the agriculture sector was accounting for less than 10 percent of the loans portfolio mainly due to lack of collateral.

“Some 14 banks have signed contracts with Tanzania Agricultural Development Bank (TADB) for it to issue guarantees that will enable farmers to access loans,” noted Mr Nsekela, who doubles as the CRDB managing director.

In an effort to give a boost to the agriculture sector, he said, CRDB has in the past three years, dished out some Sh1.6 trillion in loans to stakeholders in the entire agricultural value chain.

He said CRDB accounts for 40 percent of all loans issued to the sector.

He said last year, CRDB Bank unveiled a $200 million (about Sh459.9 billion) facility to finance climate-resilient and adaptation projects in the country, targeting six million beneficiaries in Tanzania’s agriculture sector.

Under the arrangement, the United Nations Green Climate Fund (GCF) is unveiling a $100 million (Sh230 billion) to CRDB Bank for funding while the Tanzanian lender is putting in an equal investment.

Mr Nsekela said yesterday that just last week, CRDB Bank Plc and Proparco, the subsidiary of Agence Française de Développement (AFD) focused on private sector development, inked a an agreement that will increase CRDB Bank’s capacity to support micro, small and medium-sized enterprises (MSMEs) in Tanzania through a credit line and portfolio guarantees amounting to Sh182 billion.

On the other hand, NMB Bank Plc said it was in full support of the government’s bold and ambitious vision to radically transform the national farming sector into a commercially driven modern enterprise, saying the lender was already using its financial muscle to propel the sector’s growth and that during the past five years, it has injected over Sh1.3 trillion into the farming economy and its value chain.

Briefing the President when visited the bank’s pavilion yesterday, NMB Bank’s retail banking chief Filbert Mponzi said NMB has a specialised agri-business department to better serve and adequately finance farming activities.

‘In fact, we were the first bank to create a Special Fund for lending sectoral stakeholders by pegging the loans at less than 10 percent in October last year,” he said.

Mr Mponzi said the arrangement has already benefitted over 3,700 borrowers who have received more than Sh78.8 billion in loans so far.

Apart from the credit services, he told Mama Samia that other major undertaking of the bank has been the financial inclusion drive that has led to opening of over 500,000 news accounts for farmers across the country.

NMB also supports farmers with special agriculture insurance packages and financing their medicare in conjunction with the National Health Insurance Fund (NHIF). Health insurance loans extended by the bank to nearly 700 farming groups and entities have to date amounted to Sh110 million.

Speaking on behalf of the Tanzania Private Sector Foundation (TPSF), Ms Jacqueline Mkindi commended the government under President Hassan for its political will in improving the agriculture sector.

She called on the government to put more emphasis on the production of cereal products and cooking oil to reduce reliance on the international market.

Again, Ms Mkindi - who doubles as CEO of the Tanzania Horticultural Association (Taha), called on the government to speed up its plans in enabling the massive investment in fertiliser production using the country’s resources like phosphate and natural gas.

“In doing so, Tanzania could be a production and commercial hub for Africa,” she noted.