BY SEBASTIAN MRINDOKO
THE financial sector is an essential player
in agriculture development, playing a facilitating role of bolstering the
necessary capital for farming activities like storage, processing, packaging,
transport, insurance and marketing of the produce.
Unfortunately so far, only six per cent of
Tanzanians have access to financial loans from banks, with the agricultural
sector accounting for only one per cent of the loans. The banking sector
attributes high risk in lending to farmers as the main bottleneck. According to
a recent Fin- Scope survey, the proportion of adult population using banks and
other formal financial institutions is around 12.4 per cent only.
Only three per cent of agricultural
households have access to credit excluding the rest from financial services
that are of prime importance for supporting poverty eradication strategies.
Similarly those who are totally excluded from formal and informal financial
services account for 45 per cent of adults in urban and 60 per cent in rural
areas. Moreover, bank penetration is lower than 10 per cent in most of Africa.
Being core implementers, small farmers lack
skills and capital required to acquire and adopt new technical innovations that
could help them to get out of poverty. To ensure that farmers are no longer
excluded from financial facilities, the government has incorporated the
Tanzania Agriculture Development Bank (TADB) to assist them in accessing
inexpensive long-term loans for buying farm implements.
According to the Bank of Tanzania (BoT)
Monetary Policy Statement (MPS) June 2012, the draft memorandum and articles of
association for the TADB has been completed to be followed by the registration
process. "The establishment of such an agricultural development financial
facility in the country will be a result of efforts that started in 2000, when
proposals to have a farmers' bank were put in motion," read the bank's
statement.
Presenting the 2012/13 budget estimates in
the National Assembly early this month in Dodoma, the Minister of Finance and
Economic Affairs, said the government has allocated 40bn/- and the capital
would be increased to reach 100bn/-. The upcoming TADB will be a milestone for
the government, which is endeavouring to speed up the growth of the
agricultural sector through its Kilimo Kwanza strategy.
To enhance agricultural sector growth which
is less than 4.5 per cent per year, there is need to solve constraints that
include non availability of rural credit, improved property rights and
infrastructure, the Economic and Social Research Foundation (ESRF) report has
portrayed. According to the ESRF report released last month on the role of
financial sector in agricultural development and industrialisation, securing
collateral is a large problem in the country especially for farmers who constitute
the rural poor.
"Microfinance which is seen to be
enhancing agricultural financing for the rural poor is also having barriers
such as high interest rates and management problems as well as inadequate
funds to match the demand for loans," stated the report. Microfinance
institutions account for only two per cent of total assets of the financial
system in Tanzania.
Agriculture is dominated by smallholder
farmers who cultivate average farm sizes of between 0.9 hectare and three
hectares each. The country's agriculture is rainfed. Food crop production
dominates the agricultural economy and 5.1 million hectares are cultivated
annually.
The major constraint facing the agricultural
sector is the falling labour and land productivity due to application of poor technology,
dependence on unreliable and irregular weather conditions. Both crops and
livestock are adversely affected by periodical droughts. Irrigation holds the
key to stabilising agricultural production to improve food security, increase
farmers' productivity and incomes, and also to produce higher valued crops such
as vegetables and flowers.
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