Agro sector gets boost from bank

Standard Bank plc has unveiled an agri-finance facility that seeks to boost both small-scale and large commercial farmers to promote Malaw’s economic mainstay.

Under the facility, the bank’s fully-fledged department for agri-financing is providing solutions ranging from input finance to production finance.

The Malawi Stock Exchange-listed bank, which is providing loans from a minimum of K5 million at an interest rate of 15 percent, seeks to make a positive impact on about 10 000 farmer groups linked to the formal agriculture sector. 

Speaking in an interview on Wednesday during the launch, Standard Bank plc head of business and commercial clients Graham Chipande said they want to ensure that resources pumped into the agriculture sector resonate with the size of opportunities and potential of the sector that is key to the country’s economy.

“Malawi’s economy is predominantly agro-based, which feeds into many other sectors, including financial sector and others and we felt we owe it to farmers and ensure that the level of resources we put into the sector is at the same level which would benefit the economy,” he said.

Chipande said the bank’s previous agro finance solutions only benefited a small share of the market and left out a wider population.

He said Standard Bank wants to assist more farmers and achieve meaningful development for the sector that contributes about 80 percent to the country’s foreign exchange earnings.

Chipande said: “We are now working with people in the sector to leverage on the expertise that they have whether it is capacity building, extension services or other sort of expertise in terms of developing policies and providing a conducive environment to make sure that our efforts in providing modern financial solutions can go further.”

The facility comes on the market when majority of farmers in the country are failing to access finance despite the sector being a significant source of employment, providing jobs to 80 percent of the population.

A 2021 FinMark Trust study shows that more than 70 percent of young farmers face obstacles to access finance.

Reserve Bank of Malawi data also indicates that agriculture is lagging behind in terms of receiving credit from commercial banks, accounting for only 18.6 percent of the total loans disbursed by commercial banks to various sectors of the economy.

While admitting that there has been a mismatch in terms of financing agro businesses where more  loans have been channelled to other sectors, Chipande said the bank has come out to help farmers access more through the restructured department.

He said: “We now have solutions that are catering for farmers right from the input stage all the way to value addition, including matchmaking services for exporters.

“We are working with partners that have experience in various value chains and insurance companies to provide weather-based insurance to mitigate risks that come along with agro financing.”

Players in the agriculture sector have since commended Standard Bank plc for the provision, saying it will gos a long way in enhancing and reviving the agro sector.

Applecore Grain and Milling managing director Fredrick Changaya, who is also National Working Group on Trade Policy chairperson, said in an interview the move will help unlock the potential of modern value chains to drive progress in the agro sector.

“Previously in Malawi, the agro sector, though the mainstay of the economy, was not well supported. The bank’s end-to-end solutions in the sector is thus commendable.

“This kind of support means everyone in the agriculture value chain gets a good deal which would clearly enhance the agro sector,” he said.

Malawi is an agro-based economy and agriculture, which is the main driver of the economy, contributes about 30 percent to the country’s gross domestic product, the broadest measure of the country’s economic output.