Banks mellows stance on lending forex to farmers

Mobilising for foreign currency to fund operations by farmers in the horticulture sector will soon be a thing of the past after local banks revealed were ready to extend US dollar loans more aggressively from the huge deposits of foreign currency accounts (FCAs).

The backs last week revealed were happy with supportive policy measures implemented by the Government recently.

FBC Holdings group chief executive and former Bankers Association of Zimbabwe (BAZ) president, John Mushayavanhu, told Finance and Economic Development Minister Mthuli Ncube, during the launch of the US$30 million horticulture export revolving fund last week, that banks now felt comfortable to lend from the FCA deposits they hold.

The loan facility, which is administered by a number of banks including FBC, CBZ, AFC and ZB, is guaranteed by the Government through the US$958 million Special Drawing Rights (SDRs) from the International Monetary Fund (IMF).

The IMF released the funds last year as part of the global lender’s efforts to cushion them from the negative impact of Covid-19.

Mushayavanhu said; “We had on the one side farmers who had the expertise and land and who had off-takers for the produce that they would have produced in markets such as Europe and elsewhere. These horticulture farmers would require first; money to put up a greenhouse.

“They do not have the money; they want money to upgrade their peck-house so that they meet EU standards or standards of countries they are exporting to, they want the money but banks were not willing to do so,” he said.

“So the horticulture farmers had their legs in a pool of water, which is the markets they have today, and the expertise, but they are dying of thirst because they can’t produce and export,” he said.

He added that this is the reason horticulture exports have dropped from a peak of US$300 million to US$77 million.

The banks, he said, missed on the opportunity to make good profits from lending out the FCA deposits that were building up, pointing out that as a result the US dollar loan to deposit ratio was remarkably low.

“Obviously the banks would go to their credit committees and say we have these farmers who want to borrow and the credit committees would just raise two risks.

“Risk number one; you are lending US dollars to this farmer; yes he is an exporter, but we (had) an instrument which said when a loan is due, it could be repaid either in US dollars or in Zimbabwe dollars.

“So, what happens is a farmer may elect to repay in Zimbabwe dollars, but you have taken a depositor’s money and the deposit is in US dollars.

“The second risk is; what if the farmer does not pay and you have taken the depositor’s US dollars; fortunately minister you have come to the party and you have solved that problem and I do not know what excuses our credit committees would have.

“You issued a statutory instrument, which says one; we are going to be in a multicurrency regime for the duration of NDS 1, which is 2025, so, credit committees-that risk is gone. Then secondly, in that same statutory instrument you said loans will be repaid in the currency in which they were taken.

“So if you borrow yen you must repay yen, you borrow dollars you pay dollars, you borrow Zimbabwe dollars you repay Zimbabwe dollars,” he said.

“Then there was the other risk; what if the farmer doesn’t pay; then you come to the party you say; let’s do risk sharing; I am taking 80 percent of the risk; you take 20 percent.-ebusinessweekly