Maravi

(HERALD) Banks lend US$70m to agric

Banks lend US$70m to agric
By Victoria Ruzvidzo

Banks have disbursed US$70 million to agriculture in the last two weeks as preparations for the current summer cropping season intensify.

In an interview yesterday, Bankers Association of Zimbabwe president Dr John Mangudya was upbeat about progress so far, saying the financial sector was committed to ensuring a successful 2009-2010 summer cropping season.

"We are moving with speed and I have confidence, faith and hope that what Government, banks and the farmers themselves have done will definitely go a long way in increasing productivity," said Dr Mangudya who is also CBZ Bank managing director.

A fortnight ago Reserve Bank of Zimbabwe Governor Dr Gideon Gono implored banks to increase their support to agriculture, proposing that 30 percent of deposits be loaned to the sector to ensure adequate financing for the current season while mining and manufacturing would be allocated 25 percent each.

Dr Mangudya said efforts were being made to reach such levels, saying that the current 49 percent overall deposit to loans ratio was commendable. As of last month agriculture accounted for about 9 percent of the money given out by banks.

Funds have so far been directed towards increased production of fertiliser and seed and provision of working capital to farmers.

For instance CBZ has injected funds into Windmill and ZFC for fertiliser production and into the three seed houses — Seed Co, Pioneer and Panner — as part of efforts to step up production and hence availability of inputs to farmers.

Banks were presently employing strategies to ensure loan applications and other farmers’ needs were given priority and processed expeditiously.

The outlook in the banking sector was positive. The BAZ president said confidence was creeping back into the sector while deposits were growing thus enabling banks to lend more.

"We are now moving from strength to strength. We are improving on financial intermediation. We need to do more (in terms of lending) but we need to ensure that we remain highly liquid.

Most of the deposits were presently short-term hence banks would not want to be found wanting when depositors came for their funds.

"There is a trade off between managing confidence levels and financial intermediation. For banks the tendency it to protect depositors’ funds, not by not lending but doing so without necessarily overlending.

"We want to jealously guard against loss of confidence. We want to ensure that money is secured. The money is in trust so we do not want to undermine the trust by failing to give depositors their money when they come for it," he said.

"The challenge is that presently there is no lender of last resort and no interbank market," said Dr Mangudya.

Undercapitalisation of the central bank has left it unable to perform its lender-of-last resort role through which banks can go for accommodation.

Overall Dr Mangudya was optimistic about output this season saying last season’s challenges such as inadequate supply of inputs and cases of arbitraging where farmers were selling allocated inputs on the black market had been eradicated this time around.

He challenged farmers to focus more on productivity as opposed to mere extensive farming that often produced low yields.

"The yields previously have been poor and yet if you have a smaller hectarage and you increase productivity you are bound to produce more."

The introduction of the multiple currency trading system also meant that farmers would have real prices for their produce.

"Farming is now a business venture and this is what it is supposed to be and we have realised that the farmers that are looking for inputs are real farmers now," he said.

The CBZ chief called on Zimbabweans to concentrate more on positive developments as only through a change of attitude and more focus on progressive aspects would produce results in agriculture and the rest of the economy.

"This is the time of the year when Zimbabweans should be positive and not negative. We need to motivate each other and ensure we remain positive….we will get there," said Dr Mangudya.

Dr Mangudya said presently focus was more on agriculture saying such sectors as manufacturing would soon be closing down thus their demand for funds would be minimal.

"In banking it’s a matter of timing. Now its more of agriculture…manufacturing will be closing soon for the annual shutdown," he said.

More funds were allocated to agriculture between October and April while focus on manufacturing often increased from February to October.

Other sectors were being catered for accordingly.

Labels: AGRICULTURE, CREDIT FACILITIES

posted by MrK @ 12:07 PM