Home News Rwanda aims to modernise agriculture sector, set to increase lending to 10.4 percent by 2024

Rwanda aims to modernise agriculture sector, set to increase lending to 10.4 percent by 2024

by Grace Kisembo

Rwanda aims to increase agriculture sector lending from 5.2 percent of total financial institution loans to 10.4 percent by 2024.

The objective is to modernize the sector, which currently accounts for nearly a third of the country’s GDP (GDP).

Even though agriculture has played a critical role in poverty reduction over the last decade, its share of total loans to the economy by financial institutions has remained stable at around 5%.

The industry has also had a significant impact on food and nutrition security.

Considering the current situation and trends, industry experts said, achieving financing targets will require redoubling efforts.

Agriculture faces several challenges, especially due to land degradation and soil erosion, high vulnerability to climate change, limited land, low levels of productivity for both crops and livestock, and weak processing capacity, according to information from the Ministry of Agriculture and Animal Resources (MINAGRI)

Joseph Gafaranga, a farmer and secretary-general of Imbaraga Farmers’ Organisation said that smallholder farmers are the most excluded from funding from financial institutions, particularly commercial banks.

He voiced concern that even the available loans are expensive, as they are generally charged at interest rates ranging from 18 to 24 per cent annually, putting farmers at risk of defaulting as they are unable to make profits.

“For instance, the savings and credit cooperatives are charging a 24 per cent interest rate per year, which is high,” he said, calling for low-interest and friendly loans to farmers.

Jean Bosco Iyacu, Chief Executive Officer of Access to Finance Rwanda (AFR) said that the agriculture sector has been an important pillar for the Rwandan economy and will continue to play a prominent role in driving the country 2050 development agenda.

To achieve this vision, and maintain a steady growth Iyacu said there is a need for a rapid transformation of the sector into a higher value commercial venture.

He indicated that agriculture finance stakeholders need to come up with innovative risk mitigation mechanisms and design new approaches to de-risk the sector.

“Doubling the share of agriculture lending is a high target, but it is achievable if we set extraordinary strategies, but we could be far from achieving it if we do business as usual,” he said.

George Odhiambo, Managing Director of KCB Bank Rwanda, said that the country is still importing raw materials such as maize and soybeans to run its agro-industry, pointing out that financing farmers can help address this situation.

“Financing agriculture is not riskier, because agriculture participation is an economic stabilisation activity. A population that is not food secure, is prone to disputes. So, the better your agriculture works, the more secure is the country, and the more secure are all the businesses that we have to finance,” he said.

Jean-Chrysostome Ngabitsinze, the Minister of State in the Ministry of Agriculture and Animal Resources, said that financial institutions are in a money business involving deposits from their clients and has to make a profit, but the government can work with them to develop affordable and favourable financing for farmers.

He said it’s time an agriculture financing fund be set up.

This, he said, can help provide loan guarantees or support banks to get enough money to lend to farmers.

“For sustainable way, we need to see how we can structure our financing model in agriculture and at last have a fund in which we can increase [investment] every year to make sure that money for agriculture is available, of course with an affordable interest rate,” he said.

He said that the fund can help tackle the issue of high interest rates on loans from financial institutions as the government would not be seeking to ‘trade money,’ rather help farmers.

“As the government wants its agriculture to be commercial, it is good that we think of a way we can inject a given amount of money into that fund in a given period so that it helps the farmers to access financing,” he said.

Meanwhile, Iyacu said that the participants in the above-mentioned event agreed to put in place an agriculture finance sector working group, which will help discuss issues affecting the sector regularly so that they consider the progress made, what is working and what is not to make improvement if need be.

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