When Africa, others meet on agric financing

The conference that lasted one week, from July 12 to 19, at the famous Kenyan School of Monetary Studies, was unanimous that the problems preventing agriculture from growing in the region are centred on lack of adequate access to funds by farmers to enable them to revolutionise their farming activities by mechanising the farms, developing […]

The conference that lasted one week, from July 12 to 19, at the famous Kenyan School of Monetary Studies, was unanimous that the problems preventing agriculture from growing in the region are centred on lack of adequate access to funds by farmers to enable them to revolutionise their farming activities by mechanising the farms, developing functional agric value chain for their crops and shifting from the erstwhile stage of engaging in agric as a trade to a business. The conference, co-sponsored by the African Rural and Agricultural Credit Association (AFRACA) and the Technical Centre for Agricultural and Rural Cooperation (CTA), provided avenue for networking and exchange of ideas among various stakeholders with some of the key participants setting the agenda for the discussion as thus:

Smallholder farmers are bedrock of African agriculture
Mrs Tumushime Rhoda, Peace Commission for Rural Economy and Agricultural Union Commission, said the commitment and enthusiasm is encouraging, promising that this time African agriculture transformation will materialise just like the Green Revolution in Latin America and Asia. She said: “Let us all remind ourselves over few fashionable facts about the driving role agriculture plays in economic governance and in the African continent.
“You are aware that the agricultural sector remains the predominant sector in most African Union states. It accounts for about 80% employment,about 20% of total exports and about 40% of GDP. We cannot tire to talk about this. It has since been established that agriculture and agricultural-related industries in Africa are underfunded.
“Your initiatives do compliment the efforts we are championing on the continent on the framework of aspirated transformation in line with the Comprehensive Africa Agriculture Development Programme (CADAP).
“So, if the occupation of most of our citizens in Africa is agriculture, which other sector deserves more attention than agriculture. Smallholder farmers have been the bedrock of African agriculture and should therefore not be taken for granted or marginalised but rather empowered.
“The support attracts African financial capital in agriculture and supporting industry to strengthen agriculture value chain while at the same time government should support private sector investment to enhance agricultural production. Look at the United States that has the strongest economy, it invested in agriculture, agricultural research and agro- business. They still subsidised agriculture.
“Why should we say no to subsidy in agriculture when even countries like the USA and others still do that? We have infact seen that the non-oil economies that have registered fast growth are those that are investing in agriculture. Africa has 50% of the uncultivated arable land the world has which if well managed can see to the agric transformation in Africa. Africa has abundant water resources sufficient for irrigation and fishery,” she said.

EU supports 13 countries with 4bn Euros grant
Ambassador Ledewijk Briet is the Head of Delegation, European Union in Kenya. He said Africa, the European Union and the USA have interest in keeping farmers on the farm, adding that too many young people are leaving their farms and that is not encouraging.
He said the European Union is supporting over 13 countries in sub-Saharan Africa by investing over 4 billion Euros as grant, not loans, that cover from now to 2020. EU has keen interest in receiving the conclusion and recommendation of the conference on the areas the EU can intervene on financial solution.

Only 4% of Africans have bank accounts
Millison Narch, Chairman of African Union and Agricultural Credit Association (AFRACA) and Deputy Governor, Bank of Ghana, said agriculture is highly important for developing economy, adding, “it is particularly important for food security, export, economic growth, employment generation and poverty alleviation.
“In sub-Saharan Africa, agriculture accounts for over 34% of GDP. Agric has enormous potential to substantially fund a revolutionary development economy and in turn reduce poverty. Africa is endowed with over 700 million hectares of arable land with hardly any major impediment to realising the potential of agriculture for developing its economy,” he said.
He said over 20% of the population in most developing countries do not have access to formal loan, saying the situation is even worst for Africa where only 4% of the total population have a bank account while only one percent of African families have a loan or credit facility with a formal financial institution.
He said most people in Africa lack access to financial services while most commercial banks in the continent lack interest in serving the rural communities due to their low income level or infrastructure.
“Currently, 90% of the finance that goes into agriculture comes from the farmers themselves. In these circumstances, government, policy makers, the private sector, financial institutions, government partners, development partners and all those interested in agricultural finance need to shift their approach,” he said.

In Ghana, Nigeria less than 4% of commercial bank loans go to agric
The Director of CTA, the major fancier of the conference, Michael Hailu said agriculture has become a large and complex business that requires business management and financial planning, stressing that creative needs have expanded greatly as some banks are making real progress in developing new lending technologies.
He noted that while some banks have recognised the need for new technologies, but have not been able to develop them, so many banks, seem satisfied to continue along traditional but outmoded plan even with the tremendous rate of population growth and expanding domestic markets.
He said as long as Africa maintains a high level of economic activity, the continent may expect a continued improvement in its financial capability. He advocated the identification of a suitable market for most African commodities in some of the vast and nourished countries in the world, saying African countries are potential hitting points when it comes to agricultural business.
“Unfortunately, in Africa, too many banks seem satisfied to continue with the tradition but outmoded planning. The result is that in countries like Kenya, Rwanda and Uganda for example, less than 10% of the farmers have access to formal credit especially women. In Ghana and Nigeria, less than 4% of commercial bank loans go to agriculture.
“Despite the vast commercial opportunities open to farmers, the business-as-usual scenario is not going to farming for farmers to stay at farm. That is the reason why young potential farmers are migrating to the cities every year. Clearly we need to change over. We have the necessary technologies particularly ICTs that could enable us to do so,” he said.

Agric is underfunded
Felix Koskei, Kenya’s Minister of Agriculture, Livestock and Fisheries lamented that when you listen to financial statements every time across Africa, you hear that agriculture is the main strength of the economy, agriculture is the cornerstone, agriculture is the foundation, agriculture is the driver. We hear on average that agriculture contributes between 20% and 30% of the GDP. We hear that agriculture employs an upward of 70% of the population in Africa.
“But I don’t know what goes wrong because when it comes to budgeting and allocation of funds agriculture is nowhere in the top 10. Instead of getting enough funds for the main sector that drives enough funds for the continent, we get 3%, 4% or 5% maximum. When you say agriculture is the main driver of the economy, then let us get enough money to move the sector,” he said.