The ministry of agriculture has asked parliament to push for establishment of a farmer’s bank to address the challenge of lack of access to agriculture financing.
The national bank of Rwanda Monetary Policy and Financial Stability Statement (MPFSS) 2020 showed slow growth in the agriculture sector against a steady economic growth in 2019.
The MPFSS showed that as a result of fluctuation in global market prices export commodities like coffee dropped 10.4% and tea 5.8% but the whole sector was also largely affected by climate change in general.
In review of the MPFSS, parliament said that there was evident economic growth but wondered how long issues of climate change and depending on weather will continue to determine Rwanda’s agriculture performance.
“We want to know how to move from this situation to a more sustainable agriculture but also see exports increase ” said MP Théogène Munyangeyo, the chairman of the Economic and trade committee.
However the minister of Agriculture, Dr. Geraldine Mukeshimana said that the sector faces key challenges like agriculture loans remaining generally low, an issue that Rwanda has tried to improve according to the Malabo requirements but demanding more pro-activeness from banking sector.
“We don’t have an agriculture banks which would solve this problem. We suggested this to the finance ministry but they said it was risky thus putting a branch in BRD,” Mukeshimana said while appearing before the committee this Thursday.
Though Rwanda emerged the best overall performing country in implementing the 2014 Malabo Declaration of the Comprehensive Africa Agriculture Development Programme (CAADP), improving from 6.1 in 2017 to 7.2 in 2019 against the benchmark of 6.6 out of 10 marks, local financial institutions lag behind with 6% agriculture financing.
Though banks argue that agriculture loans are risky, new authorized loans (NALs) to corporates and individuals increased in 2019, amounting to Rwf1.1 trillion, compared with Rwf966.5 billion in 2018.
Shockingly, the performance on financial institutions in the MPFSS 2020 showed they were making a drop in Non-Performing Loans (NPLs), an increase in profits as a result of the economy rebounding with their profits and assets increasing.
For instance, the NPLs ratio, the main indicator of asset quality, dropped from 6.4 % in December 2018 to 4.9 % in December 2019, while financial sector total assets increased by 13.2% to Rwf5, 271 billion.
The Banking sector continues to dominate the financial sector with a share of 66%. Pension sector follows with a share of 18% while insurance and microfinance sectors constitute 9.7% and 6.1% respectively.
Keeping on mind that banks as private entities hold the power to whom to dish loans, and the formation of a cooperative bank remaining far-fetched; Minister Mukeshimana suggested that government mandates agricultural financing to all financial institutions.
“We have seen this happen in Asia and other countries where it’s mandatory for banks to put a big percentage to finance agriculture. ,” Mukeshimana said.
She said that alternatively government should push private sector and banks to give easy and timely access of soft loans like the case of Smart Nkunganire program- a system built by Bank of Kigali (BK) TecHouse Ltd where farmers get quick agro-loans to buy fertilizers, and seeds.
The minister also informed parliament that though there was improvement of 14% growth in agriculture, Rwanda needs to focus on increasing human capacity (which is at 25%) in the agriculture sector.
Members of Parliament however, turned guns on the ministry raising concerns of delayed supply farmer fertilizers and why the ministry is not in control of designated arable land, and looking for sustainable agriculture solutions which are not weather based.
“We believe that land for cultivation is abused, when it is used for building instead of agriculture yet the reverse is not done. What is the measure to have this map or planning long lasting?” asked MP Pie Nizeyimana.
To get a better solution moving forward, the economic and trade committee said that it will soon summon other concerned authorities (ministry of finance and Central Bank) to collect more views to find lasting solutions.