Stirred by the entry of Sweden in PASS operations, the National Microfinance Bank (NMB) and CRDB Bank, the main financiers of agricultural activities in the country, have promised to intensify working relations with the trust to access more collateral challenged peasants.
Agriculture sector, though widely hyped as the national economy’s backbone, has ominously remained the hardest hit victim of limited financing, for years. Many commercial banks and other financial institutions snub the sector, which they perceive as too risky to invest in profitably. No wonder even the minimal credits to agricultural activities keep on declining year in year out.
Although, for instance, total bank loans to the productive sectors increased slightly from 14.87tri/- in 2015 to 15.4tri/- in 2016, the amount to agriculture dropped from 1.197tri/- to 1.12tri/-, over the period. But, the share of agriculture in the total credits during the period, declined from eight to 7.26 per cent, over the period.
“It’s unfortunate that some financial institutions shy away from agriculture, which is indeed the engine of industrial economy,” says PASS Managing Director Nicomed Bohay, reaffirming the trust’s commitment to boost agricultural production and processing in the country.
PASS has recently played a key role in extending credits to the collateral challenged borrowers, with reports of the central bank showing that the trust guaranteed loans account for over 10 per cent of the total credits to agriculture. In 2016, for example, PASS guaranteed 122bn/-, about 11 per cent of the total 1.12tri/- loans to agriculture related activities. And, Mr Bohay says PASS guaranteed loans are likely to increase substantially under the new partnership with the Swedish government.
“We, in PASS, are grateful for the backing of triple ‘A’ rated Sweden to our operations... more financial institutions will find it less risky to work with us because of the riskfree back up we enjoy,” said Mr Bohay, foretelling increased credit facilities to especially rural based peasants.
The Swedish government, through the Swedish Embassy in Dar es Salaam, signed a 20 million US dollars (about 45bn/-) Guarantee Agreement with PASS mid last month. The seven-year partnership is expected to boost business development support and lending to Micro, Small and Medium Sized Enterprises (MSMEs) in the country’s agricultural sector.
“Sweden has brought in gender, youth and environmental perspectives in our operations,” said Bohay, adding that access to finance by youth, particularly in rural areas, is the trust’s top priority for now.
PASS Board of Trustees Chairman Professor Andrew Temu says the organisation is determined to boost agricultural production and processing through financial support to small producers and entrepreneurs.
Under the Swedish-PASS deal, small projects but with big impact on value addition chains for agricultural produce, especially food and cash crops, will greatly benefit. “PASS has always dreamt of extending credit guarantees to as many beneficiaries as possible.
We warmly welcome Sweden as our latest partner not only to boost our capacity to serve more entrepreneurs in agriculture, but also to reassure us that out there, there are potential allies, only waiting to get inspired by the work we do,” says Prof Temu.
The new pact with Sweden will help PASS to expand its guarantee volume, enabling as many smallholder farmers and agribusinesses to enlarge their businesses, increase productivity, create more jobs and boost their incomes.
Ms Eugenia Mkoko, a smallholder rice producer in Ruvu, is one of the many beneficiaries of PASS-guaranteed loans. She says, “I greatly appreciate the financial support, which has rescued me from poverty.
Since I started working with PASS, my operations have been expanding continually.” Head of Development Cooperation at the Swedish Embassy in Dar es Salaam Ulf Källstig welcomes the deal with PASS, describing the trust as a relevant partner in the fight against poverty.
“Sweden views PASS as a highly relevant partner in its role as an intermediary who understands both banks and agribusinesses,” he says, arguing that through transforming the un-bankable into bankable clients, PASSSwedish guarantee lowers the risk to both banks and clients.
Mr Källstig sees great economic potential that wait to be unleashed for successful poverty reduction and economic development drive. Industry analysts welcome the Sweden- PASS partnership, perceiving it as the best illustration of how to share risks and collectively mobilise considerable resources for development.
Under the 20 million dollar deal, through the leverage with banks, the Swedish government has unlocked 60 million dollars (about 130bn/-) for lending to the needy peasants, especially in rural areas.
So, the Swedish support has come at the most appropriate time as the government and all development stakeholders strive to increase lending to micro, small enterprises and individuals in agriculture to both qualitative and quantitative improvement.
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