17TH CONFERENCE OF
FINANCIAL INSTITUTIONS
MEETING THE FINANCING NEEDS OF THE
AGRICULTURAL SECTOR IN TANZANIA:
THE SECOND PILLAR OF KILIMO KWANZA
Salum Shamte (FM)
Vice Chairman
Tanzania Private Sector Foundation
Arusha, 24th November, 2014
OUTLINE OF PRESENTATION
• OPPORTUNITIES AND CHALLENGES IN THE
AGRICULTURAL SECTOR.
• RAPID TRANSFORMATION OF THE SECTOR
- KILIMO KWANZA AND ITS RESULTS.
• FINANCING OF THE SECTOR :
- 2ND PILLAR OF KILIMO KWANZA.
• TAKE HOME MESSAGES FOR FINANCIAL
INSTITUTIONS.
OPPORTUNITIES IN THE
AGRICULTURAL SECTOR
• 2014 - UNITED NATIONS - INTERNATIONAL
YEAR OF FAMILY FARMING.
• 2014 - AFRICAN UNION – AFRICAN YEAR
OF AGRICULTURE AND FOOD SECURITY.
• 2014 – BOT 17TH CONFERENCE OF
FINANCIAL INSTITUTIONS - FINANCING
AGRICULTURE AND ABRIBUSINESS IN
TANZANIA.
AGRICULTURE CRITICAL FOR STRATEGIC
GLOBAL SURVIVAL AND GLOBAL PEACE
OPPORTUNITIES ctd....
• Global Market Opportunities for Farmers –
Population Growth – 10Bn By 2050;
Urbanisation;
Disposable
Income.
FOOD - FIBRE - FUEL
• Africa’s Comparative Advantage - 46 % of
Underutilised Arable Land; Water; Climate;
7 Fastest Growing Economies.
• Tanzania – Sleeping Agricultural Giant –
Land; Water; Farmers; Robust Economy;
Population;
Geographical
Location;
Political Commitment and Goodwill.
FARMERS MUST EXPLOIT OPPORTUNITIES
CHALLENGES FACING THE SECTOR
• Low Growth of 4%; Low Productivity; Poor
Connectivity to Value Chains and Markets;
• Farm Sizes Too Small Average – 2 Acres:
Leads to Low Production and Productivity;
Lack Of Power Of Negotiation; Mechanisation;
Technology; Processing And Marketing.
• Policies Not Yet Fully Attractive To
Agricultural Investment. Taxation and Special
Incentives.
• We Are Still Perpetuating Subsistence
Agriculture Rather Than Commercialising.
CHALLENGES
ctd....
• Focus Should Shift from Food Self
Sufficiency To Surplus/Profit Generation.
• Number Of Farmers Must Necessarily Go
Down – Others Absorbed In The Value Chain
[Not Everybody Who Lives In A Village Is Or
Should Be A Farmer].
• Youth Not Attracted to Agriculture If It Is Not
A Business For Profit And If It Is Not
Mechanised.
• Agriculture Is Too Important and Too
Complex to be Left to the Least Educated.
CHALLENGES ctd...
• FINANCING FOR AGRICULTURE IS DISMAL
– Average of Only 10.32% Of Total Domestic
Lending By Commercial Banks To The Agricultural
Sector in the Last 5 Years.
– 92% Went Into Trading – Only 9% Into Production
[LESS THAN 1% of Total Domestic Lending Into
Agricultural Production !!!]
– Interest Rates, Repayment, Collateral and Other
Terms Untenable and Inappropriate for the Sector.
– The Farmer Carries the Total Risk Of The Chain.
FARMERS NEED PATIENT CAPITAL
LONG TERM AT AFFORDABLE INTEREST RATES
KILIMO KWANZA RESOLUTION
• KILIMO KWANZA - A Resolution to Rapidly
Transform Our Agriculture to Take Advantage of
the Opportunities and to Address the Challenges.
Launched by H.E. President Kikwete in 2009.
• Culmination of Work Started in 2007 – Private Public Working Group under TNBC.
• A TANZANIAN RESOLVE, DEVELOPED BY
TANZANIANS, IMPLEMENTED BY TANZANIANS FOR
THE PROSPERITY OF TANZANIANS.
• Holistic Approach with 10 Pillars Implemented
Concurrently Across Various Other Sectors.
TO MODERNISE AND COMMERCIALISE OUR AGRICULTURE
RESULTS OF KILIMO KWANZA
IMPRESSIVE RESULTS AFTER JUST 5 YEARS
– Agriculture High in Tanzania’s Economic
Agenda and Big Results Now.
– Tanzania Has Food Surplus – Most Crops
Have Doubled Production in 5 years !!!
– Government
Budget
to
Agriculture
increased from 2.2% in 2005 to 8% in 2013.
– Inputs Subsidies Increased from 7.48 Bn/=
in 2006 to 92 Bn/= in 2013.
– Agricultural Window Established At TIB
Development Bank.
RESULTS OF KILIMO KWANZA ctd..
• Tanzania Agricultural Development Bank
Being Established. Board and MD In Place.
• Importation Of Tractors Increased From 356
In 2005 To 13,037 In 2012.
• Revival Of Agricultural Research and Training
Centres – Employment Of 9,200 Extension
Officers.
• ASDP 2 Being Implemented And CAADP
Compact Signed Targeting 6% Growth Rate
And Investment Of US $ 5.3 Billion.
RESULTS OF KILIMO KWANZA ctd..
• Implementing SAGCOT Concept To Attract
US $ 3.2bn/= In Investment; Create 100,000
Commercial Smallholder Farmers And
2,400,000 Lifted Out Of Poverty By 2030.
• Reduction In Agricultural Taxation.
• Educated Youth And Other Emerging
Farmers Becoming More Attracted And
Involved In The Sector.
• Many Other Initiatives Being Planned And
Implemented To Improve The Sector.
2ND PILLAR OF KILIMO KWANZA –
FINANCING THE RESOLUTION
CRITICAL TO IMPLEMENT FULLY IF THE TRANSFORMATION
PROCESS IS TO SUCCEED.
IT HAS THE FOLLOWING RECOMMENDATIONS:-
• Increase Government Budgetary Allocation To
KILIMO KWANZA. Maputo Resolution – 10%.
• Establish and Mobilise Resources for a Tanzania
Agricultural Development Bank (TADB). Start with
Capitalisation of US $ 500 Million.
• Tanzania Investment Bank (TIB) To Have A Special
Window For Concessionary Lending To The Sector.
• Establish A Special Fund To Address Land Survey
Costs,
Investment,
Capacity
Building
And
Guarantees To Complement The Requirements Of
KILIMO KWANZA.
2ND PILLAR OF KILIMO KWANZA –
FINANCING THE RESOLUTION ctd...
• Enhance Agriculture Sector Development
Programme (ASDP) Governmental And
Development Partners’ Basket Funding To
Implement KILIMO KWANZA.
• Mobilize And Attract Enhanced Agricultural
Investment By Private Sector – Small,
Medium And Large. Local and Foreign.
• Empower Farmers’ Cooperatives And SACCOS
To Mobilize, Manage And Channel Funds For
Agricultural Production To Their Members.
2ND PILLAR OF KILIMO KWANZA –
FINANCING THE RESOLUTION ctd...
• Negotiate And Legislate For Commercial
Banks To Lend A Percentage Of Their Deposits
On Concessionary Terms To Agricultural
Production. [Moral Suasion Not Working].
• Extend The Establishment Of Community
Banks In Every Region Of Tanzania.
• Establish Special Units In Financial
Institutions For Mobilizing And Disbursing
Agricultural Credit.
2ND PILLAR OF KILIMO KWANZA –
FINANCING THE RESOLUTION ctd...
• Establish Commodity Exchange to Market
Efficiently and Effectively.
• Facilitate The Easier Floatation of Agribusiness
Companies On The Dar es Salaam Stock Exchange.
• Pension, Empowerment And Other Funds To
Agree On Mechanism To Invest In Agricultural
Production At Concessionary Terms.
• Establish Social Security Arrangements For
Farmers.
• Institute Policy Instruments To Facilitate Insurance
Companies To Extend Cover And Lending To
Agriculture.
OTHER FINANCING INITIATIVES
WHICH NEED TO BE SUPPORTED
• Value Chain Financing To Share and
Reduce Risk For The Farmer.
• Contract Farming/Outgrower Schemes.
• ‘’Hub And Spoke’’ Schemes.
• Catalytic Funds And ‘’Last Mile Investment
to
Leverage
More
Private
Sector
Investment Capital.
• Advance Equity Financing And Venture
Capital.
• Agricultural Machinery Rings to Accelerate
Mechanisation.
TAKE HOME MESSAGES FOR FI’s
• Financial Institutions Should Realise The Great
Potential And Opportunities In The Agricultural
Sector – Mutually Beneficial.
• Change Attitude And Mind Set In Order To Invest In
The Agricultural Value Chains.
• FI’s Take Deliberate Innovative [Business Unusual]
Actions To Finance Agricultural Value Chains.
Share Part of The Risk.
• Interact Closely With Farmers and Farmer
Organisations To Understand Their Needs.
• Support Emerging Commercial Farmers –
Especially Youth.
• SUPPORT KILIMO KWANZA Initiatives In All
Sectors
AGRICULTURE WILL RAPIDLY
TRANSFORM OUR ECONOMY
IT CAN AND SHOULD BE DONE
PLAY YOUR PART
AHSANTE
THANKS