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Banks must support Mbare Farmers’ Market suppliers — eMkambo

Business
Commodities worth $9,8 million were supplied to Mbare Farmers’ Market from January to June this year, agriculture think-tank eMkambo has said.

Commodities worth $9,8 million were supplied to Mbare Farmers’ Market from January to June this year, agriculture think-tank eMkambo has said.

BY TARISAI MANDIZHA

In the period under review, vegetable sales recorded $5,2 million from January to June 2015 with fruits accounting for $2,1 million. Field crops recorded $1,2 million, tubers accounted for $629 000, gourds $552 000 and wild fruits $196 000.

In terms of revenue by province, Mashonaland East was the highest contributor, accounting for 42% of the total sales of $9,8 million, followed by Manicaland with 23%, Mashonaland West with 13%, Harare 12%, Mashonaland central contributing 9% and Masvingo 1%.

But eMkambo said the majority of the goods were being produced without any tangible collateral.

Collateral is something pledged as security for repayment of a loan, to be forfeited in the event of a default.

The latest report from eMkambo said at least 70% of the $9,8 million goods supplied at Mbare were produced without any tangible collateral. The think-tank said there was need for financial institutions to revisit their notion of collateral.

“For any agribusiness growth, 70% is attributable to intangible factors that represent a powerful form of collateral. The remaining 30% is attributable to tangible factors like a house which, unfortunately, can be swallowed up when the 70% is missing,” the report read.

“If a farming business is worth $10 000 but a farmer wants to borrow $2 000, he or she is saying I will provide intangible collateral worth $8 000. By insisting on title deeds, banks are reinforcing the stranglehold on agriculture by the middle and upper classes which have title deeds and other privileges.”

eMkambo said other forms of collateral, mainly intangible, should be taken seriously because the smallholder farmers, women and youth who do not have these assets were condemned to poverty.

“Non-performing loans have been caused by those with title deeds. Perhaps it is time for serious introspection by the financial industry in African countries like Zimbabwe,” eMkambo said.

Information to wards and districts where the commodities came from indicates that the form of collateral in most of the commodity sources was purely intangible while the 30% of commodities attributed to tangible collateral was quite significant, so financial institutions have to think seriously about the wisdom of recognising intangible assets which were feeding more people.

According to the report, the warehouse receipt system which the Bankers’ Association of Zimbabwe has been suggesting as a solution was not as powerful as understanding market dynamics in the people’s market.

“The warehouse receipt system works where commodities are not moving fast. In the people’s market, commodities are always in transit and there is no time you can find the market empty. Surely this convening power of the market should be considered collateral enough.

“As part of recognising commodity performance on the market, banks can simply ask a farmer to provide demand projections from a particular market for a commodity the farmer is borrowing money to produce. Price elasticity can be a key determinant informing the bank in terms of how much a farmer should borrow. Real-time trends on a fluid market are a more reliable collateral than contractual agreements with a buyer who may limit means of controlling the market,” eMkambo said.

Financial institutions have not been extending lines of credit to farmers due to high loan default rates. Banks now demand that all loans should have some form of collateral security, which many of the prospective borrowers do not have.

A number of new farmers in Zimbabwe have been battling to get financing from banks as they do not have the security to lodge with financial institutions.

Banks were still to accept 99-year leases as title deeds following government’s failure to bring closure on the land reform programme.