‘Banks should consider project viability as collateral’

The Reserve Bank of Zimbabwe is engaging banks to get them to fund small-scale farming, while Government is encouraging financial institutions to consider project viability instead of focusing solely on collateral when assessing loan applications.

Maize growers have begun preparing for summer cropping but remain apprehensive about seeking bank loans as financial institutions are reluctant to accept 99-year leases as collateral.

The banks argue that the leases are not bankable since land that agrarian reform beneficiaries occupy is State-owned.

They are also still examining the recently introduced A1 permits to determine their bankability.

Agribank is yet to receive funds from Government for onward lending while the Infrastructural Development Bank of Zimbabwe (IDBZ) has earmarked US$4 million for the summer farming season.

IDBZ interest rates will be determined by market conditions at the time of disbursement and the loans will be for 12 months for working capital and at least 18 months for capital expenditure.

Collateral will be required in the form of immoveable assets (and) the funds will be available directly from the bank.

Finance and Economic Development Secretary Mr Willard Manungo told The Sunday Mail last week that his ministry and the RBZ were working to ensure lenders fund small-scale farmers who have become Zimbabwe’s major producers.

Mr Manungo said the consultations will continue with involvement of Finance and Economic Development Minister Patrick Chinamasa and RBZ governor Dr John Mangudya.

“We can’t have a situation where banks outside the country are willing to support Zimbabwean projects at a time when our own banks are taking a back seat.

“What we want as the Government is for the banking system to support all productive sectors, including agriculture. If you overemphasise collateral, we are not going to make much progress because the biggest collateral is the viability of the project, not so much what somebody puts on the table by way of either real estate or some other collateral; it’s really the viability of the project . . . So as Government we want all farmers to be supported by the banking sector.”

Lands and Rural Resettlement Minister Dr Douglas Mombeshora weighed in, saying banks should seriously consider funding farmers.

“We launched tenure documents (A1 settlement permits) on July 2 and it is up to the banks to decide how they will fund farmers. We have availed tenure documents for both A1 and A2 farmers so that they have title to the land allocated to them.

“I don’t know why they are refusing to finance new farmers when they are funding white farmers who are farming on land that does not belong to them. Why should they deny funding to people who have title to the land?

“I don’t understand why that is happening.”