The Sunday Mail
Tawanda Musarurwa
Zimbabwe’s biggest lender, CBZ Holdings, has come up with a transformational lending system to the agriculture sector, which almost completely eliminates defaults on payments but also enhances the sector’s contribution to the economy.
This comes as the bank recorded a 876 percent increase in total advances to $29,4 billion during the year to December 30, 2020, with a significant chunk of these loans being channelled to agriculture.
Increased funding to agriculture is vital insofar as the sector remains the lifeblood of Zimbabwe’s economy.
Under Government’s smart agriculture funding, banks are now playing a critical role in extending loans to farmers.
In an interview with The Sunday Mail Business, CBZ chief executive officer Mr Blessing Mudavanhu said the new financing model focuses on the entire agriculture sector value chain.
“We don’t actually give money to the farmer: We give them inputs equivalent to the money they would have applied for.
“We have partnered with suppliers such as Seed Co, for example. So if you are a farmer wanting to grow maize and you need ‘x’ amount of seed, we get exactly that which suits your space,” he said.
“That also reduces the risk of people using the money for something else, so we control the whole value chain — the suppliers, the farmer and the off-taker. All those are within sight, and they are our clients one way or the other. So to have that closed loop has actually been helping in mitigating against credit risk.”
The bank’s agriculture segment — CBZ Agro Yield, which was launched in 2019 — has been coming through in this regard.
For the year ended December 30, 2020, it recorded a net profit of $299 million.
Agriculture was a key contributor to the group’s 1 893 percent growth in total income over the year under review.
CBZ chairperson Mr Marc Holtzman also told The Sunday Mail Business that the new lending system ultimately benefits the wider economy.
“This strategy is transformational as we have eliminated a lot of either corruption or risk of repayment.
“We have also significantly reduced NPLs (non-performing loans) as a result of this, and we have made it more efficient, which allows us to direct the resources to those worthy and deserving farmers who are producing and adding to the economy,” he said.
Zimbabwe is still largely agro-based and will register significant gains from an efficiently working sector.
According to data from the Food and Agriculture Organisation (FAO), agricultural activities in Zimbabwe provide employment and income for 60 to 70 percent of the population.
It also supplies 60 percent of raw materials required by the industrial sector and contributes 40 percent of total export earnings.
The sector also contributes approximately 17 percent to Gross Domestic Product (GDP).
Added Mr Holtzman: “Agriculture is a vital economic sector not only for food security but also for the agro-industry, and it will remain our mandate to support and fund the sector.
Many of Zimbabwe’s manufacturing companies feed from agricultural inputs.
“We also link our farmers to markets to ascertain product uptake and, in many cases, this also comes with agronomic support. These, in addition to the usual farm visits and crop monitoring, work towards reducing default risk.”
The lender is also involved in mechanisation.
Meanwhile, CBZ Agro Yield has completed contracting 49 377 hectares for the winter cropping season, accounting for 78 percent of the targeted 60 000 hectares.
Government has been shaping strategies to boost agriculture production and its efforts through Command Agriculture and the Presidential Inputs Support Scheme, including the latest conservation farming method (Pfumvudza/Intwasa), have seen the country realising a bumber harvest for the 2020/2021 cropping season.
