LIVINGSTONE MARUFU
The high cost of capital is hurting farmers as they cannot borrow from banks to finance their activities, Business Times can report.
The lenders, farmers said, were charging up to 70% interest rate on loans and want banks to reduce the rates.
“You are not sure if local banks are serious about funding agriculture as the current interest rate of around 70% per annum is exorbitant and does not promote production in the fields. Using this rate, very few farmers are able to repay loans and even if they repay those loans, growers will struggle to break even or report profits,” the Zimbabwe Commercial Farmers Union president Shadreck Makombe told Business Times this week.
Recently, the Reserve Bank of Zimbabwe reviewed interest rates to 60% from 40% to discourage lending for speculative purposes.
Makombe said it is a positive development but the central bank should come up with special lending rates for productive sectors.
“It is commendable for the central bank to give special lending rates to farmers from the government related institutions like AFC Commercial Bank so that farmers can easily access loans to be productive,” he said.
PHI Commodities operations director Graeme Murdoch said the lending institutions have made lending difficult to farmers who would want profit after selling the produce.
“Despite the recent bank policy review by the Reserve Bank of Zimbabwe to 60%, the banks and other lending institutions have further increased the interest rates by 10% to around 70%, making it difficult for an ordinary farmer to make profits,” Murdoch said.
He said instead the banks should give farmers special rates to enable them to improve production levels.
Makombe proposes that the money the economy is spending on agriculture and food imports is invested in farming at a special interest rate for farmers to borrow in local currency and single digit for those borrowing in United States dollars.
During the past summer cropping season Zimbabwe attained over 3m tonnes of cereals against the demand of 2.2m for both livestock and human consumption, giving the country a surplus of 800,000 tonnes of grain.
Makombe said Zimbabwe should invest on irrigation infrastructure to mitigate weather vagaries.
