Farmers could get low-interest loans thanks to a US$300 million (over Rwf313 billion) project unveiled last week.

The project aims to commercialise and de-risk the agriculture sector in Rwanda through irrigation, insurance and affordable financing, according to officials.

Dubbed Commercialisation and De-Risking for Agricultural Transformation Project (CDAT), the five-year initiative running through April 30, 2027, was launched by the Government of Rwanda and the World Bank Group.

It is funded by the World Bank Group via International Development Association (IDA), with 75 per cent of the funds as loan to the Government of Rwanda, while the rest is grant.

The project will be implemented by the Rwanda Agriculture and Animal Resources Development Board and the Development Bank of Rwanda (BRD).

CDAT targets to increase the use of irrigation and commercialisation among producers and agribusiness firms across the country, as well as access to agriculture finance and insurance.

While the average interest rate on loans from financial institutions is at 16.4 per cent per year in the country, according to the National Bank of Rwanda, farmers could get loans at around half of that rate thanks to this project.

The development comes as Rwanda targets to double agriculture sector lending from a modest 5.2 per cent of the total share of loans from financial institutions to 10.4 per cent by 2024.

Despite the agriculture sector’s contribution of nearly a third of the country’s Gross Domestic Product (GDP), lending to it has been limited because financial institutions have been reluctant to finance it, sector players indicated.

Scaling up agricultural finance

This project component will include a ‘Scaling up Agricultural Finance,’ which was allocated $55 million (over Rwf57 billion), according to Steven Rwamurangwa, Single Project Implementation Unit (SPIU) Coordinator at the Rwanda Agriculture Board (RAB).

Lending to farmers or farmers’ organisations will consist of a blended approach, Rwamurangwa said.

He indicated that 90 per cent of the loan will be given out to farmers at a subsidised interest rate of 8 per cent (CDAT Interest Rate), and 10 per cent of the loan will be at the normal lending rates of the different participating financial institutions.

He specified that the ceiling (maximum loan) is Rwf600 million per borrower.

The project will offer a credit line for long-term agricultural finance to commercial banks, Microfinance institutions (MFIs), and the Umurenge Savings and Credit Cooperatives (SACCOs), for loan provision to promote capital investments and cover working capital for agribusiness growth by target beneficiaries.

Targeted project beneficiaries are farmers, farmers’ cooperatives and micro small and medium sized agri-enterprises (agri-MSMEs), with priority to those led by women, while crop value chains targeted are namely maize, rice, horticulture (including vegetables, fruits and flowers), Irish potatoes, cassava and beans.

But, it will also support livestock ventures including diary, piggery, poultry, feeds, animal shelter construction, animal breeding, and fishing.

Sakina Usengimana, CEO and founder of Afri Foods, a horticulture company, said that she currently exports around 300 tonnes of horticultural products per year.

As farmers, the young female agribusiness entrepreneur said, they are expecting interventions from this project, such as strengthening their capacity and competitiveness, as well as access to affordable finance in order to grow their businesses and increase profitability.

"We don’t want to submit [in the bank] a project that will spend 11 months in evaluation (for financing consideration),” she said, calling for expedited funding for agribusiness projects and elimination of lengthy processes and requirements that can deny farmers access to it.

"I have seen that the [loan] interest rate will be low [under this project]; we are grateful and excited to be able to access that,” she said, expressing the need for access to quality affordable inputs for the development of the agricultural sector.

Gerardine Mukeshimana, Rwanda’s Minister of Agriculture and Animal Resources said, "It has come at the right time when our farmers are currently facing fertiliser challenges. It is smart for the Government of Rwanda and the World Bank to have initiated this project.”

Strengthening agricultural insurance

With $20 million funding, this will provide insurance premium co-financing whereby, beneficiaries will get 60 per cent contribution from the project, and then they will meet the remaining 40 per cent.

The target is to insure 265,000 ha for crops, and 337,000 livestock (heads).

Overall expected impact

Overall, about 235,977 households (accounting for 11 per cent of Rwanda’s 2.1 million farming households), including women and youth will benefit from the project’s value chain and infrastructure development, 2,235 from agriculture finance, while 575,000 and 75,000 farmers will benefit from the project’s crop and livestock insurance respectively.

"Commercialising agriculture is essential for Rwanda’s economic transformation and poverty reduction and requires investments that enhance productivity in a sustainable manner, and that generate agriculture value addition and off-farm jobs,” said Rolande Pryce, World Bank Country Manager for Rwanda.

Initially, the project will be implemented in 37 sites located in 16 districts; Muhanga, Nyanza, Ruhango, Huye, Gisagara and Nyaruguru in Southern Province, Kayonza, Bugesera, Gatsibo, Nyagatare and Kirehe in Eastern Province, Rusizi and Nyamasheke in Western Province, Gicumbi in Northern Province, Gasabo and Kicukiro in the City of Kigali.