Thedeal between the East African Exchange (EAX) and selected banks to offer grain farmers low interest loans has started to bear fruit as the first batch of beneficiaries prepare to receive funding from Ecobank.

Alfah Kadri, the EAX chief executive officer, said over six farmers are awaiting credit from the bank under the arrangement.

EAX signed the deal with the bank last year to provide finance under the warehouse receipt system.

In an interview with The New Times, Kadri said the bank was evaluating the applications and would soon give out loans to the first batch of farmers.

The deal will benefit farmers belonging to co-operatives that store their grains at EAX warehouses.

When farmers deposit their produce at EAX warehouses, they are issued receipts, which they can use as collateral under the warehouse receipt system to acquire loans.

"We have already submitted the farmers’ warehouse receipts to Ecobank…However, since this is the first time they are handling these kinds of applications, it has taken long to process the farmers loans,” he said.

Last year, the exchange signed memoranda of understanding with Ecobank and Banque Populaire du Rwanda (BPR) to give farmers, who trade their grain through EAX, loans of up to 70 per cent of the total grain value of their produce.

The loans will attract interest rates of between eight and 20 per cent, according to Kadri.

The credit will offer the farmers a much-needed financial lifeline as most commercial banks do not lend to the agriculture sector, arguing that it is risky.

Under the warehouse receipt system, farmers can deposit their grains with EAX warehouses in different parts of the country. They are issued receipts, which they also use to trade their produce through the Nasdaq trading platform any time of the year.

Kadri noted that EAX is able to offer farmers better prices because they only deal with clients who offer good prices.

Lending to the agriculture sector is currently below five per cent of the total loans in the Rwandan economy.

Commercial banks rejected an estimated 58 per cent of agriculture loan applications in 2014, according to central bank figures.

But with initiatives like EAX’s, the situation could soon change.

Kadri said farmers are gradually buying into this alternative way to access financing.

Meanwhile, he projected that maize prices could go up by about 30 per cent in the next three months as supply reduces, an opportunity he said farmers who store grain with EAX will exploit to earn more from their produce.