Germany envoy rues high interest rates

German head of mission Andreas Hartmann has decried the continued rise in bank interest rates, saying they are negatively impacting small and medium enterprises (SMEs) and fuelling poverty.

He said this on Thursday in Ntchisi District where a German-supported initiative that provides low-cost credit to rural businesses launched loan products through Micro Loan Foundation (MLF), a micro finance institution.

Hartmann challenged the country’s banks to learn from how the project has de-risked lending and increased access to finance for small agriculture-based entrepreneurs in rural areas.

Under the initiative, Ntchisi rural-based women entrepreneurs have recorded a 100 percent loan repayment for two years, challenging the notion of banks that financing agricultureis risky.

Hartmann said interest rates at above 26 percent are too high for SMEs to thrive, as such, there is need for initiatives that increase access and reduce the risk for SMEs.

“Agri-based enterprises face multiple constraints in running businesses either due to poor infrastructure and services such as market information and storage, limited business skills and market linkages and difficulty in accessing formal finance,” he said.

He further said financial products and services that are tailored specifically for the rural agricultural sector have the potential to transform SMEs.

The project, being implemented through GIZ, is targeting 15 000 growers to adopt financial services and 9 000 to have used at least one of the financial products after undergoing capacity building programme.

Micro Loan Foundation chief executive officer Davison Rakasi said the project has helped the institution to reach out to more rural women in agro-based businesses and through its approach, there is high rate of loan recoveries in the districts it operates.

He said: “Ntchisi has been achieving 100 percent loan recovery for two years now during which we disbursed up to K900 million  a year.

“This is achieved because we have tailor-made loan products such as what we have launched, which speaks to the needs of these entrepreneurs.”

Rakasi said the firm is reaching out to over 15 000 rural farmers and agri-based entrepreneurs.

One of the loan beneficiaries, Agness Kawulufu of Katela Village, Senior Chief Chilooko in the district, said their high loan recovery rate is a result of working in groups to ensure that they do not default.

Through a group called Kasita Centre, she got K300 000 loan that helped her in farming.