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John Mangudya

Oliver Kazunga, Senior Business Reporter
THE Reserve Bank of Zimbabwe is crafting an Agricultural and Rural Development Credit Policy aimed at expanding banking services to rural areas with a view of maximising use of the land.

The proposal is part the 2016 monetary policy statement announced by RBZ governor John Mangudya last week.

The central bank boss noted that Zimbabwe was an agro-based economy with agriculture contributing about 12 percent of the country’s Gross Domestic Product and more than 60 percent of inputs to the manufacturing sector.

Against this background, Mangudya said access to financial services, particularly by smallholder farmers, remains a major bottleneck to agricultural performance in Zimbabwe.

“Given the significance of the agriculture sector to the economy, banking institutions are required to scale up their lending support to the agricultural sector.

“The Agricultural Marketing Authority is called upon to identify and promote the development of vibrant markets and linkages… In this regard, the bank is developing an Agricultural and Rural Credit Policy,” said Mangudya.

“The policy aims to make agricultural credit more disciplined and methodical, easily available to all the farmers and all areas with a view to expand banking services to rural areas and maximising use of agricultural land.”

The envisaged policy covers major agriculture subsectors including crop, livestock, and fish production, agri-equipment, irrigation equipment, grain storage and marketing.

Mangudya said the main thrust of the government through the policy was among others to make the nation self-sufficient in food through increasing production of all crops, ensuring a profitable and sustainable agricultural production system and improving farmers’ income generation capacity as well as reducing excessive dependence on any single crop to minimize risk. He said to ensure the country’s self-sufficiency and food security, the banking sector should prioritise lending for the production of crops such as maize, cotton, tobacco and horticulture.

“Total lending to agriculture should constitute a minimum of 20 percent of a banking institution’s total loan portfolio.

“Banking institutions are required to report on quarterly basis information on their agricultural portfolios with effect from quarter period ending June 30 2016. The detailed variables to be reported will be provided by the Reserve Bank in due course,” said Mangudya.

Stakeholders in the agriculture sector have been calling on banks to reduce interest rates amid reports that financial institutions had mobilised capital for lending to farmers during the 2015/16 summer cropping season.

Over the years, farmers have been failing to access loans due to stringent lending conditions.

As a result of limited access to funding, this has also put a dent on efforts by the farmers to improve agricultural output, a development that has seen the country in recent years importing maize from neighbouring countries such as Zambia and South Africa to cover the deficit.

The country requires about 1,8 million tonnes of grain for human and livestock consumption per year.