Malawian investors in the cassava value chain have complained of high interest rates commercial banks charge borrowers, saying they are hindering investment.
Currently, commercial banks in the country charge up to 44 percent to borrowers, a rate many analysts have argued is expensive for businesses.
Speaking at the Cassava Investment Forum held at Sunbird Mzuzu on Wednesday, Cassava Adding Value for Africa (Cava) project manager Vito Sandifolo said investors are failing to optimise the commercialisation of cassava due to the high interest rates.
He said the high cost of borrowing money from financial institutions prohibits private sector investment in agro-processing and participation in the cassava value chains
Said Sandifolo: “Financial service providers are also unwilling to invest in farmer-based organisations as they are perceived high risk, coupled with demand for collateral.”
He said although cassava products have high demand for exports, currently the country is exporting at a very small scale to Zimbabwe and Zambia, mostly for beer production, as investments in the production and processing technologies are very low.
“Producers are hindered by lack of resources; hence currently, production is minimal although there is high demand for the commodity,” said Sandifolo.
He said currently Malawi is losing a lot of foreign exchange importing starch and wheat flour when it can be locally produced by farmers in the country if they have access to credit facilities.
Sandifolo also said samples of high quality cassava flour (HQCF) from the country sent to Germany and The Netherlands proved that Malawi produces good quality cassava flour for industrial use.
He said combined demand for HQCF and starch on the international market is currently pegged at 80 000 tonnes annually.
In an interview on the sidelines of the event, National Bank of Malawi (NBM) business development manager (agri-business section) Samuel Ngwira said interest rates look prohibitive at the face value.
However, he encouraged cassava investors to form clubs and negotiate as groups instead of doing the same on individual basis.
Agriculture is the backbone of the country’s economy and is estimated to account for 35.5 percent of the gross domestic product and contributing about 82.5 percent of export earnings.
Experts have argued that Malawi’s high interest rates have worsened access to capital among the country’s entrepreneurs, mostly the small and medium enterprises (SMEs) segment. n