AS Government-owned Agribank tries to make a determined break from non-performing loans (NPLs), which made up a fifth of its loan portfolio in 2015, it is shifting focus to smallholder farmers with capacity to repay.
The bank was established to improve food security through financing agriculture.
In its refocused thrust, out grower farming schemes — particularly those backed by companies and with ready markets — will be prioritised.
Agribank’s NPLs have progressively dropped from 20 percent in 2015 to the current 14 percent following the adoption of credit management strategies, debt recovery initiatives and the transfer of US$26 million worth of bad debts to the Zimbabwe Asset Management Company. Zamco is a special purpose vehicle created by the Reserve Bank of Zimbabwe in 2014 to hive off NPLs.
Agribank CEO Mr Sam Malaba said last week it was important to “lend where you are sure the client will pay”.
“We are remodelling our lending to increase repayments. It’s a challenge to banks to say ‘where do you lend?’ So you basically lend where you are sure that you can get your money back. This strategy will help us to bring down our NPLs to about five percent by the end of the year,” said Mr Malaba.
Part of the funding will help smallholder producers of bananas, beans, sugar cane and tobacco; as well as support irrigation schemes and beneficiaries of the Brazilian More Food for Africa Programme.
Financing smallholder farmers can improve raw material supplies to manufacturers, cut imports and boost exports in the medium to long-term.
Zimbabwean manufacturers get about 60 percent of their raw materials from local producers.
Mr Malaba said, “The bank is now one of the biggest financiers of the smallholder sugar cane farmers in the low veld. The bank will also work in partnership with major tobacco industry players like TIMB (Tobacco Industry and Marketing Board) and TRB (Tobacco Research Board) for the development of the tobacco industry, which is a major foreign currency earner in the country.”
Tobacco is critical to the economy, earning Zimbabwe more than US$900 million last year.
Agribank has already entered into a strategic partnership with TIMB that will see it financing the construction of rocket barns and drip irrigation for smallholder tobacco farmers.
Also, US$1,5 million has since been earmarked for horticultural production throughout the country.
“(The) target is to expand other fresh produce markets in all provincial centres and other outlying areas such as Zvishavane and Binga. The bank will also work on backward linkages to finance growers and link them to the fresh produce farmers’ markets,” added Mr Malaba.