Commission outlines Agro finance hurdles

N

ational Planning Commission (NPC) has said sustained financial investment is key to transforming the current subsistence agriculture production to commercial farming.

In a policy brief titled ‘Financing opportunities for a highly productive and commercialised agriculture’, NPC says access to finance is a critical part of any developed agriculture, but requires collaboration among stakeholders.

The brief, which is part of the Malawi 2063 policy brief series published periodically by the NPC, said that drawing farmers and small entrepreneurs in Malawi into the financial system will succeed if public and private sector work together.

NPC acknowledges the existence of formal financing institutions and development partners, which have been administering loans, matching grants and credit guarantee to stimulate access to credit in the sector.

But it says that financing for agricultural investments in Malawi is scarce and unbalanced, even for large-scale investors.

Reads the brief in part: “This, therefore, requires a combination of good laws, a specialised financial sector and profitable businesses of small and large farmers and companies in the agriculture sector.

“A requisite policy needs to ensure credit guarantee is fully utilised by farmers, foster adequate rural infrastructure development, access and registration of collateral and create demand for agriculture finance.”

The NPC, which is the focal point in the implementation of MW2063, says government can play a proactive role by promoting laws and regulations with new financial instruments or even raising awareness of existing ones to bring them to the attention of the financial and agricultural sectors.

Speaking in an earlier interview, agriculture development policy expert Tamani Nkhono-Mvula said agriculture initiatives government has been implementing in the past 20 years have failed to stimulate real and lasting growth of the sector.

He said generally, government has been preoccupied with achieving food security through financing costly subsidies than development of agriculture value chains through strategic sector investments.

Said Nkhono-Mvula: “Programmes such as the Agricultural Commercialisation project have not brought significant change to the sector as we had hoped.

“The mega farms, therefore, could go a long way in complementing the efforts we currently have through such programmes. If government takes keen interest to analyse and strategically invest in the sectors that form a supporting system for these mega farms like energy and transport infrastructure, these mega farms could become the magic wand for the country.”

A study conducted by FinMark Trust last year found that in Malawi, agriculture financing remains an area of concern as funding of farm activities for production of agriculture products has remained minimal.

The study showed that more than 70 percent of young farmers face obstacles to access finance.

Experts have since indicated that financial institutions regard agriculture as a risky sector, which faces numerous challenges, including weather shocks that affect intended outcomes.

But Malawi Agricultural and Industrial Investment Corporation (Maiic) managing director Taziona Chaponda is on record as having said that finance is not a constraint to investment in Malawi given the presence of Maiic, NBM Development Bank and the Export Development Fund.

He said the major problem is the lack of technical expertise to develop tangible bankable project proposals to convince funders.