Malawi mulls over Agribank
Malawi Government has said discussions are underway with financial institutions to establish a medium to long- term loan facility, particularly for players in the agriculture sector, to enhance production.
This comes against the background of the country having no special farmers or agriculture banks, as is the case in other countries, to provide credit for farmers.
Most of the smallholder farmers, about 4.5 million, who largely contribute to the agriculture sector in Malawi, live in the rural areas where retail banking and other financial services are limited.
Apart from that, most farmers do not have the collateral required for banks to extend loans to them.
Malawi’s economy is agro-based with the agriculture sector alone contributing about 29 percent to the gross domestic product (GDP)—the broadest measure of economic activity.
Secretary for Agriculture and Food Security Jeffrey Luhanga said on Wednesday in Blantyre that most of the agriculture activities require investment in form of medium to long-term loans, which is mostly hard to access.
“Within government, this issue is being discussed with the private sector interested to set up this facility. It is something that is seriously under consideration,” he said, at a joint news conference held with the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) to announce the start of the three-day agriculture fair yesterday at Chichiri Trade Fair grounds in Blantyre.
Luhanga said the introduction of Integrated Production System (IPS)—an initiative in which tobacco buyers combine farming and marketing strategies—in the tobacco sector last year, is one such initiative in which farmers access loans from banks to boost production.
He said because of IPS, in which 80 percent of the crop was supported through provision of fertiliser and other inputs, tobacco output this year increased and quality was enhanced.
MCCCI chief executive officer Chancellor Kaferapanjira, while supporting the introduction of special loan facilities for the agriculture sector, noted that there are also parallel efforts by some banks to develop products that tailored towards the agriculture sector.
He recalled that in the 1970s and 80s, between 70 percent and 80 percent of the bank’s loan portfolio was taken up by agriculture loans, unlike nowadays when a huge chunk is going towards the wholesale, retails and tobacco processing.
