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Who’s to Blame For No Bank Loans to Agricultural Sector?

by Jean de la Croix Tabaro
6:56 pm

Financial institutions in Rwanda have maintained their position saying the agriculture sector is ‘insecure’ to invest in.

The central banks says of the total lending portfolio from commercial banks, only 5% goes to agriculture.

On February 3, farmers met the financiers during an agricultural forum that was organized by civil society platform.

During the meeting, farmers were optimistic something positive would come out. Yet, financiers wanted to prove to farmers that the ball was in their hand.

Ephraim Turahirwa, the CEO of Banque Populaire du Rwanda, largest financier of agribusiness, with over 190 branches, said, “we cannot lend anyone until we find our money will be returned, with interests.”

Farmers then turned to the Development Bank of Rwanda (BRD), saying the bank is selective and prefers to lending to the ‘rich’.

Alexis Kanyankore, BRD Chief Executive Office defended the bank saying, “our business model is not well understood.”

He said for BRD, a project worth Rwf 15M is the smallest they can finance, but smaller projects can be financed through refinancing system.

However, farmers complain that even when a bank accepts to offer a loan, interest rates go up to 21%.

Kanyankore advised farmers to present well studied bankable projects. This way, he said, they will not feel the burden of interest rates.

(2nd right) Alexis Kanyankore BRD's CEO on a panel with other officials.

(2nd right) Alexis Kanyankore BRD’s CEO on a panel with other officials.

Banque Populaire has completed a trial phase of Sarura product, offering farmers loans from Rwf 90,000 to Rwf 5M.

Under Sarura product, the bank has given out Rwf 400M to rice farmers in East province in six months, repayment starts on the 9th with the season.

This arrangement requires no collateral, except 30% of the project which is deposited on the account, and keeps generating interest rate of 4% during the loan repayment.

Tonny Nsanganira, Minister of State for Agriculture suggests that, “banks have not been approaching farmers to meticulously give them information on existing products.”

Kanyankore says the way to maximize agricultural financing is by completing value chain, by creating a post-harvest industry.