The International Fund for Agricultural Development (Ifad) in partnership with NBS Bank plc has launched a $5 million (about K8.5 billion) fund for tea and macadamia nuts farmers.
Under the arrangement, expected to alleviate financing challenges, Ifad is providing a 10-year loan to the bank with an interest of five percent to encourage value addition for the commodities.
Speaking at the NBS Food and Agribusiness Conference in Blantyre on Wednesday, Ifad country representative Bernadette Mukonyora said the funding has come with soft loan terms that she hoped the bank would transfer to the farmers.
She said: “Malawi is looking at the agriculture sector as the critical driver of the economy. The MW2063 talks about agriculture commercialisation.
Simwaka: Most of these farmers export their crop
“We want to create wealth in this country, we want to create prosperity. The agriculture sector is that sector that will assist the government to achieve that objective.”
Tea Association of Malawi vice-chairperson Atu Kalinga admitted that the sector is facing multiple challenges, including lack of funding.
He said: “The major problem is financing as tea has a long gestation period. It takes a minimum of three years to start harvesting. Maybe this facility that NBS is bringing in may solve this problem.”
Similarly, Msamba Estate manager Malcolm Kayes said lack of funding has been a challenge in macadamia production. He said the problems also include shortage of nuts cracking machines.
NBS Bank plc deputy chief executive officer Temwani Simwaka said the bank’s role is to ensure that farmers are able to access financing to be able to produce and add value before taking them to the market.
She said: “It would be difficult for us as NBS Bank alone to use our money to tie it in for that long period.
“Most of these farmers export their crop and most of their costs are in foreign currency, so it just makes sense for us to get money which is in US dollars, give it to the farmers for a longer period of time, enable them to produce, and then they will earn the dollar again.”
Ifad has a portfolio of about $480 million in Malawi supporting various sectors of agriculture including irrigation, enterprise development and rural finance unlocking.