The Reserve Bank of Malawi (RBM) has set aside K25 billion ($150m) to be loaned out to farmers from this farming season under what is called Export Development Fund (EDF) to increase the exports of non-traditional export crops.
Farmers Union of Malawi (FUM) president Felix Jumbe said on Monday that the farmersÃ¢â‚¬â„¢ body will be facilitating the processing of the loan with the RBM acting as a guarantor of the 70 percent of the loan farmers will have acquired from selected commercial banks.
The move by the RBM and FUM has been necessitated by the urgent need to widen MalawiÃ¢â‚¬â„¢s export base to increase the generation of foreign currency, which has been in short supply for the past two years or so, affecting the procurement of essential imports such as fuel, fertiliser and drugs.
This also comes at a time when the RBM set the target for the private sector to generate over $1 billion (about K167 billion) by September 2012.
Jumbe, who described the fund as timely, said the move is in realisation that Malawi has not been exporting more of its crops, relying only on a few of them that do not bring in more foreign currency to satisfy a growing demand.
Ã¢â‚¬Å“We have only been relying on tobacco, tea and sugar as export crops for a long time. We want to promote the growing of crops such as groundnuts, soya, beans, pigeon peas which have huge markets outside the country,Ã¢â‚¬Â he said.
Jumbe said there is a huge market for pigeon peas in India and that of groundnuts in Kenya and Uganda which Malawi can capitalise on.
Tobacco, the countryÃ¢â‚¬â„¢s main export crop, wires in about 60 percent of total foreign currency earnings followed by tea, sugar and coffee, among others.
Under this fund, export processing centres will be established in all the countryÃ¢â‚¬â„¢s three regions where farmers can be given contracts to grow the crop with FUM validating the capabilities of the farmers.
Ã¢â‚¬Å“There is no lending system from the banks and, at the same time, no serious lenders to farmers. Because of a lack of funding, some farmers go to the extent of using subsidy fertiliser to apply in tobacco farms,Ã¢â‚¬Â he said.
But Jumbe said much as they realise that the money is not enough for the many farmers the country has, this is the move in the right direction.
RBM spokesperson Ralph Tseka could not be reached for a comment yesterday as his phone went unanswered. Business News wanted to find out from the central bank how much they intend to realise in export revenue from this initiative.
President Bingu wa Mutharika last year told chief executive officers of the countryÃ¢â‚¬â„¢s commercial banks that he wants Malawi to have a foreign currency buffer of at least $2 billion (K334 billion) by December 2012 which will give the country an import cover of above 15 months up from the current fragile cover of below the internationally recommended three months.
This farming season, government has set aside K1.6 billion cotton subsidy to enable the country generate more than $300 million (K50 billion) in foreign currency.