Local banks and financial institutions are still refusing to take as collateral the 99-year lease agreements despite the Government’s announcement last year that the document is now bankable and thus can be used in loan applications.
Lands and Rural Resettlement Minister, Dr Douglas Mombeshora, told our sister paper The Herald late last year that Government had agreed to amend some sections of the 99-year leases to suit the requirements of the financial institutions.
However, most banks are still refusing to accept the leases arguing that properties allocated to land reform beneficiaries remained State-owned land and could not be sold to recover funds in the event farmers defaulted on payment.
The situation has resulted in many farmers failing to access loans to either commence or boost their operations and increase production as many of them cannot meet the prerequisite of providing immovable collateral when applying loans.
Zimbabwe Commercial Farmers Union (ZCFU) president, Mr Wonder Chabikwa, said that there is still lack of clarity as far as the lease agreements are concerned.
“When the 99-year leases were done and made bankable farmers were happy because they could now invest and develop the land without the fear of being evicted at any moment,” he said.
“They (99-year leases) are good because they also help preserve our environment because people would be looking after the land as if it belonged to them.
“However, in terms of bankability no bank I know has taken them as collateral when awarding loans.
Not any one of our members has been awarded a loan where the lease was taken as collateral.”
Chabikwa added that even if the 99-year leases were to become bankable, most farmers would not afford the loans.
“Maybe it’s a case of lack of clarity because if you are talking about bankability you are talking about something which is transferable,” he said.
“Besides even if they become bankable and financial institutions start taking them as collateral the interest rates charged locally are just too high.
“With most of these institutions charging an average of 22 percent interest rate, it’s a sure thing that most farmers who will take up these loans will not be able to pay them back.”
Contacted for comment Bankers Association of Zimbabwe president, Mr Sam Malaba, would not confirm or deny the reports as he requested written questions which he said would be forwarded to the executive for responses.
“I have received the questions but I have forwarded them to the executive for responses when they are done we will give them to you,” he said.
The responses had not come through by the time of going to print.
Despite other banks staying away from farming, Zimbabwe Farmers Union (ZFU) information officer, Mr Tinashe Kairiza, last week told local media that his organisation had partnered Barclays Bank to create a fund for young rural farmers.
“The initiative by Barclays Bank to partner ZFU in setting up this fund is commendable because it demonstrates the potential that young people possess in running viable agricultural enterprises if they are adequately supported,” he said.
“It is our expectation that our young farmers will take advantage of this fund to grow their business enterprises as well as improve their capability on running their farming activities as viable business.”
Local farmers are struggling to stay in business with a majority of them greatly affected by high cost of farming.
They say as long as banks keep on turning their backs on them, the future of agriculture in Zimbabwe is doomed.
Minister Mombeshora could not be reached for comment as efforts to get him on his mobile phone were fruitless.
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