Access to finance is critical for the growth of Tanzania’s agriculture sector where the shift from subsistence to commercial agricultural production requires capital.
Apart from the country having more than 50 banks, many of the financial institutions are reluctant to accept the risks prevalent in the agricultural sector, such as droughts, floods, pests and diseases, or the transaction costs of covering large geographical distances.
But the government of Tanzania has made huge efforts to ensure that agriculture financing services to the agriculture sector which contribute 29.7% of the GDP, as well as 65.5% of the direct labour force and 10% indirect labour force, becomes a priority in the financial institutions.
Hussein Bashe, the minister for agriculture said recently: “Soon, we hope to see agriculture and related activities attract more bank loans.”
The minister pointed out that the demand for agricultural finance outstripped supply by far, which explains government efforts to commercialise the sector.
“Although agriculture, directly and indirectly, employs the majority of Tanzanians, it accounted for only 8.3 percent of the Sh20 trillion in loans issued last year, thus the need to unlock more private capital for the sector’s growth,” Mr Bashe said.
He further said that not all of the credit extended last year in 2021 went directly into farming, and most were disbursed to value chain actors.
The Bank of Tanzania’s Monthly Economic Review (MER) for June 2022 indicated that the agriculture sector grew by 42.1 percent, from -10.7 percent recorded in June 2021.
The Role of Government in Financing Agriculture
Aside from private sources of finance, the government is also an important source of finance for developing the country’s agriculture sector.
Public financing can focus on particular actors, such as small farmers or enterprises; on particular issues, such as environmental protection and organic agriculture or on particular geographic locations.
Other promising government initiatives include the creation of Tanzania Agricultural Development Bank Limited (TADB) in September 2012 to strengthen the agriculture financing value chain and support the nation’s initiatives to shape and implement policies and initiatives for agricultural and rural lending.
TADB as a key stakeholder in the development and envisaged revolution of the agricultural sector, is committed to delivering on undertakings made in the context of the national agriculture-related strategies consistent with its Vision, Mission and Objectives.
The state-owned agricultural bank guarantees facilitate financial intermediaries to provide loans to farmers without adequate collateral by using innovative financing products including joint-liability arrangements, agri-input loans and others.
Priority areas for agricultural financing
Many of the financial institutions in the country have recently worked with farmers involved with sunflower, maize, cashew, sugarcane, fish farming, vegetables and spices.
Sunflower farming
“Sunflower farming receives enough financial support because it is one of the key sectors for industrial development. There is a huge sunflower oil market in Tanzania and outside the country that’s why financial institutions are investedinvesting their money into this area,” Bibiana Mafuru, a Singida-based extension officer said.
Fishing industry
Another agricultural area that received much financial support is fish farming whereby the loan is granted to fish farmers and people in the fishing business for the purchase of fishing equipment, boats, cooling equipment, and construction of fish ponds.
Last year, International Fund for Agricultural Development (IFAD) support the Tanzanian fishing sector with $77.4 million to increase the capacity of aquaculture development centres, allowing them to produce 25 million tilapia fingerlings and 10 million catfish a year as well as increase the supply and bring down the prices of fish in the local market.
On their part, NMB Bank Pls has last year set aside 100bn/- as a loan for lending entrepreneurs in the whole value chain in fishing, livestock keeping and all agricultural sectors.
ThFor their part, NMB Bank Pls has ousands of Tanzanians utilising such loans from NMB Bank at affordable interest ratesbecause of only 10 per cent per annum compared to between 14 and 18 per cent charged previously.
Sugarcane
Sugarcane farming is also one of the cash crops that received huge financing compared to other crops due to the fact that the country has a huge demand for sugar as all of the sugar produced is consumed within the country.
CRDB Bank, the largest lender in the land, has so far loaned Kagera Sugar $100m to double production. The loan enables the sugar producer to increase its production to 91,000 tonnes a year from 600 tonnes in 2001
However, the government on its part said that is planning to spend Sh1.8 billion annually on sugarcane farming, Agriculture Minister said after visiting Kilombero Sugar Factory in July this year.
Bashe has also urged for a tri-party agreement that will involve the government, the processing plant which buys from outgrowers and financial institutions so that small-scale farmers can access loans for the crop’s development.
Where to visit when you need agricultural financing in Tanzania
Farmers and other stakeholders in agriculture can visit Tanzania Agricultural Development Bank (TADB), also known as the Farmer's Bank to get inner information on agricultural financing projects that are supported by the bank.
TADB has recently partnered with commercial banks and financial institutions such as NMB, CRDB, Azania Bank, TPB, Stanbic Bank, FINCA Microfinance, UCHUMI Commercial Bank, Tandahimba Community Bank (TACOBA), Mufindi Community Bank (MUCOBA) and now NBC to ensure that farmers are financed.
TADB believes that through this strong network of strategic cooperation, a large number of small-holder farmers will be reached
Other financial institutions that are financing agricultural projects in the country include CRDB Bank PLC, NMB Bank, NBC Bank, Equity Bank and many more.
NMB Bank
NMB Bank announced to all its customers in the whole value chain of agriculture, livestock and fisheries will start offering loans at affordable interest rates. These loans will be disbursed at interest rates not exceeding 10 per cent per annum.
The beneficiaries of these affordable loans are namely farmers, suppliers of farm inputs, service providers, entrepreneurs, and small and medium processors engaging in all activities in the agriculture, livestock and fishing sectors.
Over TZS 100 Billion are set aside for affordable loans to customers in the whole value chain of agriculture, livestock and fisheries
NMB Bank has taken this initiative to widen the scope of stakeholders in the sectors like agriculture, livestock and fisheries to access affordable loans to increase productivity in their economic activities.
A customer will get relief from the cost of loans and thus be able to make more profits. The profit gained can be used to increase the production of food, and industrial raw materials and contribute to industrial development in the country.
NMB Bank expects that farmers, livestock keepers, fishers, business people as well as small and medium entrepreneurs in agrispace make use of the unique opportunity to access low-cost loans to increase their incomes and build the country’s economy.
The Bank will observe the conditions in offering these affordable loans by following the lending procedures including the highest loan amount of 1 billion shillings per
borrower. The borrower can be an individual, cooperative society, company or any institution that will meet the conditions for lending.
The Bank is urging all the intended stakeholders in this initiative to visit its branches (over 225 branches countrywide) and access loans at affordable interest rates.
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