Friday, August 07, 2009

DBZ launches fund for IFAD pilot project

DBZ launches fund for IFAD pilot project
Written by Chiwoyu Sinyangwe
Friday, August 07, 2009 2:41:30 PM

DEVELOPMENT Bank of Zambia (DBZ) has launched a US $4 millionInternational Fund for Agriculture Development (IFAD) sponsored pilot project to provide affordable financing to out-grower contractors of small-scale agricultural producers.
The purpose of the fund is to increase the use of sustainable financial services in rural areas and improve the livelihood of rural households as well as the viability of rural enterprises.

Through the credit facility for contracted small-scale production, the rural finance programme would promote the supply of sustainable financial services to contract farming companies and other bankable organizations that bonded small-scale producers.

During the launch on Wednesday evening, DBZ managing director Dr Abraham Mwenda announced that two banks had signed the lending contract with DBZ while more banks had expressed interest to sign up for the facility.

“Our role as the apex development finance institution is to disburse and manage funds available under the facility to participating financial institutions,” Dr Mwenda said. “The participating financial institutions include commercial banks and non-bank financial institutions, which will or have already signed up for the facility for onward lending to qualifying private contractor agricultural marketing, processing and out-grower companies. The loans will be specifically used to finance seasonal inputs, purchase farm produce and other products from contracted small-scale farm produce and other products from contracted small-scale producers, and small capital investment needs such as ploughs and other farming implements.”

Dr Mwenda said according to the features of the facility, the maximum exposure to a single borrower is US $500,000 or its kwacha equivalent while the maximum amount of funds a participating financial institutions was able to access was US $2 million which would be allocated on a first-come, first-serve basis.

“DBZ will lend to participating financial institutions on a clean basis as these institutions will not be required to provide collateral to access the funds,” said Dr Mwenda. “In setting their lending rates, participating financial institutions will be allowed to factor in the profile of prospective clients. Risk premiums are, however, expected not to make the loans beyond the reach of the ultimate borrowers.”

And agriculture and cooperatives minister Dr Brian Chituwo observed that lack of finance on reliable basis had been identified as one of the key constraints for most Zambian marketing and processing companies to expand their smallholder based contracted production operations.

“So far in Zambia, the availability of such financial services on a continuous basis has been very limited, as commercial banks with their urban orientation have shown marginal interest in rural production-related investment of this type,” said Dr Chituwo when he officiated at the launch of the fund.

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