News Column

Experts Fault Banks Over Sidelining Agriculture Sector

July 17, 2014

Masembe Tambwe

AGRICULTURAL professionals in Africa have cited banks' inability to understand how the sector operates as the biggest hurdle limiting farmers from adequately accessing finance.

Speaking on risk management tools for agricultural finance, an official from Upland Rice Millers Limited of Uganda, Mr Phillip Idro, said the fact that bankers did not understand the business of farmers was actually causing them to incur risks.

"The point that most bankers are missing is the fact that we are living in an agricultural economy and that about everything revolves around this sector.

It surprises that they willingly have money for breweries yet fail to realise the basic ingredients for a brewery are goods produced by farmers, the same people they are avoiding," he explained.

Mr Idro said bankers were more flexible at providing access to credit to industries like breweries and textiles because of their high value addition, but pointed out that there was need to emulate models from China and Europe of subsidising farmers because smallholder farmers were given subsidies.

He said it was his firm belief that the fear among bankers was misplaced and that the bad evaluation that they usually gave to farmers after demanding their business plans and bank statement reappraisal was an indicator that they knew little about agricultural mechanics.

Kenya Equity Bank General Manager for Agribusiness, Ms Esther Muiruri, said that whilst she agreed that many people in the banking fraternity knew little about the nitty-gritty of agriculture, her bank had started efforts to go around the hurdle.

Ms Muiruri said she differed with agriculturalists that agriculture should be looked at differently as a business, but rather that it should be parallel with other businesses, with risks just like others and find solutions to reducing these risks.

"We at Equity Bank have started employing people from agricultural institutions and are impacting them with management skills such that they are able to understand the needs of the farmers and in turn help in bridging the gap between farmers and bankers," she explained.

On the very contentious issue, that has been one of the topics of discussion during the four-day conference on revolutionising finance for agri-value chains, interest rate, she said that there was need for farmers to be made aware about the implications of increased inflation and what it meant to lending.

Kenya Ministry of Agriculture Trade Promotion Officer in Agribusiness department, Ms Annastacia Kivuva, said lending trends in the East Africa region showed that investment in agribusiness by banks was reducing over time.

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Source: AllAfrica

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