Agric funding drops by 9pc

Zimbabwe Association of Micro Finance Institutions (Zamfi) says agricultural lending for the last quarter of 2018 declined by nine percent on the back of perceived risk in agriculture which was predicted by the Meteorological Services Department during the period.

In its macro finance sector performance report released on Monday Zamfi said as at December 31, 2018, lending to the productive sector declined from 23 percent to 14 percent.

The report was released at a time when the country is facing a climate-induced drought which has threatened food security in the country.
“This is in line with perceived risk in agriculture sector for the 2018-19 seasons which was predicted by MSD report released on August 28, 2018.”
The report showed that October to December 2018 and January to March 2019 period would be characterised by erratic rainfall patterns, thereby affecting both crop and livestock production in the country, Zamfi said.
Last week, MSD said while light showers may be may be received; summer is coming to an end, marking the end of the 2018-19 rain season.
The prediction, Zamfi said, presented funding challenges for Micro Finance Institutions (MFIs) which responded by shifting their funding to the other sectors, notably business and consumption loans.
The shift influenced the increase of loans to the business sector and consumption loans which increased from 26 percent to 40 percent and 29 percent to 32 percent respectively.
Zamfi noted that MFIs loan support to the business sector bears economic rewards as it increases local production of goods and services, in addition to creation of jobs that are more rewarding to the workers.
“MFIs that are keen to continue supporting the agriculture sector, in spite of the perceived high risk, may be advised to support farmers around areas with irrigation systems in rural district areas around the country.
“This is in addition to supporting farmers in production of small grains which tend to thrive under harsh conditions,” the association said.
During the period under review, Zamfi said the credit only micro finance sector remained generally profitable but under threat of unsustainability due to deterioration in macroeconomic conditions during the last quarter of 2018.
It said a number of developments such as the controversial two percent money transfer tax, unstable market value of the local currency — RTGS balances and bond note — as well as social and political tensions negatively affected the enabling environment of microfinance.
“Due to these negative developments the sector reported reduced level of profitability as demonstrated by an aggregate net profit of $11,13 million as at December 30, 2018 compared with $20,5 million in December 2017,” it said.