To their credit

Farmers need access to credit to make the step from subsistence to business. In a recent training session, local bank reps explained their loan criteria to agricultural entrepreneurs in the making.

To develop Africa’s small agribusiness sector, farmers/entrepreneurs need access to affordable credit and the right skills to start, manage and grow their enterprises. How can they obtain information about credit facilities and learn other practical aspects of business management to support their vegetable and seed production businesses?

To address these challenges, the Australian Centre for International Agricultural Research (ACIAR)-funded VINESA project, “Improving Income and Nutrition in Eastern and Southern Africa by Enhancing Vegetable-based Farming and Food Systems in Peri-urban Corridors” organized a one-day training for 18 young farmers on 26 June 2014 at HORTI-Tengeru, Arusha, Tanzania.

Officers from Equity Bank, Arusha Branch, Tanzania joined staff from AVRDC and HORTI-Tengeru for the training session. Equity Bank, one of the leading financial institutions in the region, has a strong focus on credit for small and medium enterprises (SMEs); the bank has shown keen interest in working with VINESA to develop a credit model for small farmers and seed companies that also meets the lending policies of the bank.

Reagan Gladson, Equity Bank Credit Officer, explained the meaning of entrepreneurship and its application in agriculture. Mr. Gladson noted that entrepreneurial skills create employment, enable production that targets specific market opportunities, improve market players’ incomes, and conserve the environment through efficient and effective use of resources such as time, land, knowledge and skills, and finance. The young farmers were challenged to keep records of their day-to-day activities including costs of inputs, farm labor, crop yields, sales and income. He recommended that the participants save any surplus income, no matter how small; this will contribute to their creditworthiness when applying for loans at any institution. He emphasized the importance of building lasting partnerships, accepting and adapting to change, and making the effort to search for the right information.

Bank officers evaluate loan applications from farmers based on several key criteria.

Shemeji Melayeki, Agricultural Officer from Equity Bank, said his bank reviews an applicant’s self-introduction, business premises, farm recordkeeping skills and knowledge of financial management. Unlike other credit institutions, Equity Bank takes a value chain approach when financing agricultural enterprises. This approach considers all the key players within a given value chain, from input suppliers to consumers. Agatha Aloyce, VINESA Country Coordinator for Tanzania, noted that VINESA also uses a value chain perspective in its effort to assist small vegetable growers to identify profitable market opportunities and produce vegetables that satisfy the needs of selected customers and consumers.

John Macharia, VINESA Project Manager, shared his experience in entrepreneurship and told participants how small farmers in Kenya significantly increased their incomes through farming credit from Equity Bank. He gave an example of how a group of farmers aiming to produce quality seed through contracts from seed companies could benefit from credit by (i) purchasing a tractor to facilitate faster preparation of a larger land area, (ii) renting the tractor to other farmers to raise extra income, (iii) procuring a seed extraction plant for their own use, and (iv) renting the facility to other seed growers. This would increase their income by improving the quality of their seed, thus fetching higher prices, and from rent of the tractor and seed extraction plant.

This one-day training session changed participants’ mindsets about credit. In future sessions, participants will meet other credit providers in addition to Equity to widen their entrepreneurial skills and experiences with different lending policies. It is anticipated that after the farmers graduate from training at VINESA’s Best Practice Hubs, they will be in a better position to select the right provider of credit with respect to the type of enterprises they wish to expand. Effective links between farmers and credit providers will definitely facilitate better credit acquisition and enhance management of selected agribusinesses to generate more income at individual, household and community levels.