In an attempt to turnaround the fortunes of the agriculture sector, Rwanda’s largest lender, Bank of Kigali, has introduced a financial product meant to increase the ability of farmers to access loans. Lack of access to credit has long been cited as one of the major challenges for local farmers. Despite producing about 30 per cent of Gross Domestic Product and providing livelihoods to over 70 per cent of the population, the agriculture sector receives only 6 per cent of all loans, according to central bank data. The low disbursement of loans according to local banks is a result of lack of verifiable data on farmers’ practices, high risk perception as well as high transactional costs between banks and farmers. This is what has partly prompted Bank of Kigali to introduce a new solution dubbed IKOFI , which aims at increasing loans to farmers as well as collecting data to reduce the risk perception over time. The platform launched at Transform Africa Summit among other objectives aims at enabling farmers receive subsidies from government and make payments for agro-inputs. The platform enables farmers to pay for inputs at agro-dealer outlets directly, hence building a credit history—critical in helping banks to make a decision on whether to lend or not lend money to a client. Bank of Kigali’s Chief Executive, Diane Karusisi, said that among other impacts, the platform will also ensure that funds borrowed or given are not diverted for other purposes. “The tool among other things will ensure that money lent to clients is used for purposes it was borrowed for. That means that the loans cannot be cashed out and used for other purposes,” she said. “Beyond being a payment solution, it is also a tool that creates a digital footprint on how much farmers harvest and invest thus giving us the trust we need to lend in the agricultural sector,” she added. The government says that the development is likely to increase the eligibility of farmers to accessing credit which has long been holding back the growth of the sector. The Minister of Agriculture, Geraldine Mukeshimana, said that the low levels of access to credit for farmers has made it impossible for local farmers to scale up their operations or adopt the latest production trends. She said that it is such developments and innovation by the private sector that are a sure way to increase financial inclusion among farmers as well as their access to credit. Eric Rwigamba, the Director General of the Financial Sector Development at the Ministry of Finance said that such tools can serve to reduce the risks and perceptions as they will provide information to financiers on the sector’s financial patterns. “Digitizing the agricultural sector with digital financial solutions will support the government to reach 100 per cent financial inclusion and 80 per cent cashless economy by 2024. Rwigamba said. The Bank also signed an agreement with Alliance for a Green Revolution in Africa (AGRA) to cooperate on improved access to quality inputs for farmers as well as financing. Jennifer Baarn the Head of Partnerships of at AGRA said that they hope to gradually change the perception of the sector in the eyes of financiers and other stakeholders going forward.
