Loans from banks to the agricultural sector for growth, has been estimated at 3.5% of the industry’s entire loan portfolio.
In addition to the considerable low injection of loan capital into the sector, findings from a recent report by Feed The Future, indicates that loans from banks to the agric sector has stagnated since 2020 when the Central Bank put in place stimulus measures to sustain the economy amid the Covid-19 pandemic.
Per the report, the low exposure of banks to the sector, is due to high risks associated with agricultural lending.
According to the report, non-performing loans exposure of banks to the sector is currently 25% of total loans to the sector.
Another finding of the report is the high interest rates on loans given to agribusinesses.
Interest rates on loans as result of the current macroeconomic environment, has led banks to charge as high as 30% interests on loans to agribusinesses.
“These rates are too high for farmers, especially those engaged in primary agriculture,” the report noted.
As part of measures aimed at increasing the flow of funds to the sector from banks in particular, the report recommended that government improves on mitigation mechanisms currently in place to foster agricultural lending and also address regulatory bottlenecks that prevent banks and alternate finance lenders from lending to the agric sector.
