ZB Financial Holdings has dumped the government’s import substitution programme, Command Agriculture Scheme, and will now fund its clients after Treasury took long to approve its funding proposal, it emerged this week.
This year, the government has left the banks to provide funding for the import substitution programme to improve transparency in the scheme and for loan recovery.
ZB chief executive Ron Mutandagayi told Business Times that the ZWL$150m which was meant for Command agriculture will now be augmented with the other ZWL$150m to make it ZWL$300m for the bank’s total agriculture investment for the new season.
“Since the Treasury took too long to approve our ZWL$150m Command Agriculture Scheme proposal, we have just transferred the money to our agriculture portfolio to ensure our farmers have adequate funding for their crops,” Mutandagayi said.
Agricultural experts are warning the government that the 2019/2020 summer cropping season may be disastrous if banks continue with stringent conditions as very few farmers have made it so far.
The development comes at a time when most farmers have also abandoned the programme due to stringent conditions put up by banks. ZB is the second highest funder in agriculture after CBZ Bank. From the ZWL$150m, ZB had earlier planned to invest ZWL$50m in tobacco, ZWL$40m in livestock, ZWL$30m in soyabeans and ZWL$30m in maize.
Zimbabwe’s maize productivity levels have decreased to 0.7 tonnes per hectare, from 0.9 tonnes per hectare in 2017 due to poor rainfall patterns, the lack of irrigation infrastructure, and the lack of funding.
Mutandagayi said ZB would facilitate the funding of farmers to diversify its loan book and assist in increasing productivity. ZB is targeting both small scale and large scale farmers at affordable interest rates. The bank expects farmers to repay loans at the end of the season after they deliver their crops to various selling boards.
The tobacco sector is likely to struggle in terms of funding as most merchants failed to repay offshore loans due to the failure by tobacco farmers’ to fulfill their obligations. Tobacco is the other sector ZB has trained its sight on due to interests from various merchants to apply for loans locally.
“We have received a number of applications from various tobacco merchants but we are still looking into the matter and will see the way forward in the near future,” Mutandagayi said.
ZB invested US$20m in agriculture in the last summer cropping season. The bank believes farmers should invest in irrigation to remove overdependence on rain-fed agriculture so that the farmers could be cushioned from droughts.
ZB is looking at providing capital expenditure but such funding requires a longer tenure with farmers asking for anything between three and five-year money.
The group will fund the setting up of irrigation facilities to enable farmers to produce all year round and improve productivity.