Business Reporter

Farmers must immediately deploy their Zimbabwe dollar loans into the acquisition of key inputs upon receiving the funds to counter the negative impact of prevailing high inflation, the Agriculture Development Bank (Agribank) says.

This comes as Agribank said it had $1.3 billion outstanding funding applications from farmers. The bank recently received $200 million under the Reserve Bank’s Medium term bank accommodation, but the funding fell short of requirements.

Of that amount, $150 million was channelled towards funding various areas of agriculture, $25 million went specifically to winter wheat production and the balance to gold and manufacturing.

Agribank chief executive Mr Elfas Chimbera said in an interview that although inflation was posing a huge threat to productive deployment of borrowed funds, with interest for loans remaining high, farmers needed to procure their inputs as soon as they get the money.

Mr Chimbera’s remarks come after inflation hit 785.6 percent in May driven by a volatile black market exchange rate, which has decimated the value of the Zimbabwe since its reintroduction early last year.

However, authorities have vowed to pursue all avenues to ensure exchange rate stability to preserve the value of the local currency and halt runaway inflation with the latest intervention being the adoption of the auction system to set a formal rate.

This will allow formal and predictable access to foreign currency by importing businesses at reasonable rates for production, which must translate into price, inflation and Zimbabwe dollar stability.

But Mr Chimbera said while efforts to restore order in the market, which has already started to bear fruit with the fall in bread prices and return to sanity in fuel pricing, timing was key among farmers when deploying their agriculture loans.

“In terms of interest, there is a lot of interest but the important thing is timing.  In agriculture we need to respond very fast; once the facilities are approved you, do not have to spend a day or two before using the money because quotations can change,” he said.

Mr Chimbera said funding agriculture, which is the mandate of the State-owned financial institution, was very important given the sector was one of only a few with potential to directly take people out of poverty.

Interestingly, Agribank has managed to drastically reduce non-performing loans among its clients, with Mr Chimbera saying the NPLs stood 1 percent below regulatory requirement of 5 percent.

“We had to re-look at the whole strategy in lending and moreso in agriculture; many people shy away from agriculture because of the risks that are there, but when we re-looked and re-strategised, we said lets look at smart agriculture and smart lending.

“With smart agriculture and smart lending, security and collateral as the fall-back position is not the determinant when you are lending.

“You first educate your farmers to say, take this as a business; farming as a business. And with that you say what are your cash-flows; do you have a viable project so that you can sustain your agriculture, so we look at cash-flow  and whether risks are adequately covered,” he said.

The bank, which declared a dividend of over  $15 million to Government for 2019, said it had beat all targets for the period to May despite operating in a tough environment.