No loans to actual farmers in Agribank’s ‘very good loan book’

 Agribank seems to have pulled off the neat trick of 'supporting agriculture,' but very carefully avoiding lending to the people who actually work the land; farmers.

Limited access to finance is one of the key issues to Zimbabwean agricultural recovery that is talked about endlessly.

With the title-deeds based land tenure system of pre-2000 having been torn to shreds by the ‘fast track’ land reform programme, there is not going to be any quick resolution of the impasse of how new farmers can reliably access farming finance. Most banks will continue to shy away from agricultural lending as long as land tenure security and other key issues remain unresolved.

The Commercial Bank of Zimbabwe, a significantly government-owned bank, has done better in this respect than the private banks. One would think that Agribank, a wholly-owned government bank that exists mainly to assist the development of agriculture, would also be in the forefront of finding innovative ways to fund new farmers even with the post-land reform challenges that remain.

That does not appear to be the case. They appear to have found a way of lending which allows them to technically, correctly say they are ‘supporting agriculture,’ but without actually having to lend to very many new farmers. Yet how to spur agricultural recovery/development by lending to new farmers in the political and economic environment that exists today is arguably the great issue/challenge of the day for an ‘agricultural bank.’

 ‘Agribank turns the corner’ in the 1st February issue of the Herald tells the story of a vaguely self-congratulatory meeting of the bank’s MD, Sam Malaba, with the Press.

According to the Herald, 'Agribank has managed to free itself from the financial quagmire that has been weighing down on its operations and is poised to report a profit for the year ending December 31 2011 for first time since dollarization.'

Dollarization is Zimnglish for the hyperinflation-ending replacement of Zimbabwe’s worthless dollar currency with a number of foreign currencies, mainly the US dollar, in 2009.

Malaba was not ready to give the quantum of the expected profit for 2011, but the Herald said the bank had incurred a loss of US$8.2 million in 2010.

"The quality of the loan book (US$73 million) is very good, with non-performing loans just under 5 percent as at December 2011. The non-performing loan book was 4 percent in 2010," Malaba is quoted by the Herald as ‘boasting.’

According to the Herald, developments since 2009 have left the government-owned bank in a much stronger financial position and well placed to play a major role in supporting the agriculture sector. Some of those developments include a six-year US$30 million loan to Agribank from South Africa’s Industrial Development Corporation ‘for on-lending to agriculture.’

US$30 million is a drop in the bucket considering recent claims that Zimbabwe’s agriculture needs $2.5 billion in annual investment, but obviously, anything is better than nothing.

The on-lending terms of the IDC loan are quite generous: Beneficiaries will repay the funds over six years. They have six months grace period on interest payment and one year relief from settling the principal loan amount. They will also pay interest of 16 percent per annum in the first repayment year and 14 percent thereafter.

The absurdly high-sounding interest rates are actually quite good in Zimbabwean banking terms! It’s a good racket.

So, who is Agribank ‘on-lending’ to? What role is Agribank playing in this neglected aspect of ‘supporting agriculture?’ How many new farmers is the country’s agricultural bank nurturing to grow from struggling operators to the next generation of serious commercial farmers?

Umm, apparently, not very many; if any at all.

Some of the key beneficiaries mentioned: fertilizer firms, namely ZFC, Windmill and Chemplex. ‘Although inadequate to cover all their requirements, the funds helped them shore up production,’ we are told.

Well, alright, fertilizer companies are an important part of the agricultural mix. Let’s read on to find out how much ‘on-lending’ was extended to the actual farmers who will use the fertilizer.

Not quite yet. The Herald tells us, ‘Agro-focused firms such as Olivine Industries and Interfresh and other manufacturing firms that included Zimglass, Zim Copper, Sunway City and Aluminum Industries also benefited.’

‘Agro-focused manufacturing firms’ are important. Thank you, Agribank, for supporting them.

But what about finance to the actual farmers whose efforts are the basis on which all else in agriculture depends? How much did they benefit from Agribank loans? How is the 100% government-owned agricultural bank supporting the farmers who got land in the government’s land reform programme, but who are struggling to make their operations ‘commercial?’

As the reader has probably guessed by now, zilch. Nada. Rien. Zero. Or at least, so little that Agribank’s Malaba did not find the figure worth boasting about to the Herald.

So there you have it: Agribank, the country’s sole agriculture-dedicated financier, has a ‘very good loan book,’ but that ‘good’ loan book mostly does not involve any lending to farmers!!!

‘Good’ by what standard; to who?

The Zimbabwe Review