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Agribank puts aside N$300 million for farmers

In a bid to boost output and enhance productivity of the agricultural sector, the Agricultural Bank of Namibia (Agribank) has put aside a provisional budget of N$300 million for lending to farmers during 2012.
In an interview with the Economist, Regan Mwazi, manager of marketing communication and research at Agribank, said that the bank aims to assist a minimum of 500 small-scale farmers in communal areas and 300 commercial farmers.
However, due to small-scale farmers’ inability to provide collateral, the number of clients to be assisted per year always fluctuate. Mwazi said the problem is exacerbated as the majority of small-scale farmers in rural areas did not secure land rights to enable them to access credit and in so doing, expand and develop agricultural land to its full potential.
From January to December 2011, a total of 703 Namibians benefited from the loans approved by Agribank.
According to Mwazi, during this period, the bank approved a total of N$252 million, whereby a total of N$113 million were loans approved for the purchase of commercial farm land by 37 previously disadvantaged Namibians, which constitute 45% of the total loans approved, followed by livestock product with a total of N$75 million approved loans benefiting 495 Namibians.
“Take over of agricultural debts from other financial institutions amounted to N$28.5 million benefiting 18 Namibians,” he said.
Last year, more loans were approved for livestock farmers as compared to crop farmers.
Mwazi said this is due to the fact that livestock is the mainstay of the agricultural sector, contributing an estimated 87% of the output.
“As such, livestock is the most preferred product by the majority of the clients as a result of easy access to abattoirs and the constant demand for livestock products by neighbouring countries, especially South Africa. Agribank’s investment in the livestock sector increased to N$75 million or 30% of the total loans approved. Also, Namibia is traditionally a livestock producing country and the majority of the population raises animals to generate income to meet daily immediate needs,” he added.
Agribank also approved loans for crop farmers.
Agribank invested N$18 million in the crop farming sector during the 2011, which translates into 7% of the total loans approved. “It is clearly evident from loans approved that livestock is the most preferred type of farming in the country,” he said.
In 2010, crop farming contributed 1.9 % to agricultural output. However, with the establishment and promotion of the Green Scheme, its contribution to the output is expected to significantly increase.
Records indicate that small-scale farmers under the National Agricultural Credit Programme submitted more loan applications with a less amount. “For instance during the year under review, 433 small-scale farmers benefited out of the total of 703 clients for N$53.6 million. In contrast, 37 previously disadvantaged Namibians bought commercial farms worth N$113 million,” said Mwazi.
Meanwhile, since 2010, the default rate of loans fluctuated between 3.5% to 6% per month.
The loan default rate is hard to predict as “agriculture is influenced by natural factors that are sometimes quite difficult to predict. However, given the trends of such factors the industry always get prepared to mitigate the effects of any factors that may disrupt productivity. So defaults could increase if the weather is harsh or decrease if the weather is above normal,” he said.
The continuing debt crisis in Europe is a major concern for producers in the agricultural sector, as it can have adverse effects by decreasing demand of Namibian exports, said Mwazi.
With Namibia exploring new markets such as China and Dubai and the investment by Government in Green Scheme, agro-processing business hubs and the aggressive promotion of buying Namibian products especially horticulture could strongly support growth in the sector beyond expectations.
He also said that any increase in oil prices will also have a negative impact on the sector.

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