Firm, economist tip govt on agricultural financing

Palladium Group and agricultural economist Horace Phiri have called for strong and sustainable partnerships to unlock financing to the agricultural sector to ensure that smallholder farmers have the resources to develop alternative value chains.

The advice comes after National Planning Commission director general Thomas Chataghalala Munthali who asked the government to “take an active role in catalysing investments in the strategic sectors of the economy”.

The Palladium Group, an advisory and management firm that is running the Growth Poles project on behalf of the US Agency for International Development (USaid), said stakeholders can unlock financing for smallholder farmers in alternative value chains by creating linkages to improve smallholder’s access to finance.

In an e-mailed response, Growth Poles chief of party Tate Munro said it is important for implementing partners to understand the business interests of different stakeholders in the value chain and develop areas of mutually beneficial interventions.

He said: “Palladium has developed the expertise to identify and demonstrate the mutual benefits and shared value of our partnership, including the facilitation of market linkages, support of value-addition, exports and employment opportunities among other advantages.”

Under this model, piloted under the previous USaid- funded Ag Diversification Activity, Palladium will partner with private sector partners, the Growth Poles, to invest in value chain development and other community development activities.

Reacting to the model, Lilongwe University of Agriculture and Natural Resources agricultural economist Horace Phiri said the financing model used by the Palladium Group is a good initiative, but stressed that farmers should be encouraged to use their savings to scale up production on their farms.

He said: “These models have worked in the past, but usually they work within the project set-up when the implementing partners can act as guarantors for loans and repay the loans when the smallholders default.

“However, when the guarantees stop at the end of the project, the micro-finance institutions withdraw their support. This is why it is so important to encourage farmers to save up through VSLs and extend loans to each other within their localities.”