Price volatility holds back access to finance by farmers

Instability in prices of agricultural products is restraining financial institutions from extending credit to farmers, thus lowering production, according to Rwanda Development Bank (BRD).Joséphine Umurerwa, Head of Agriculture Projects Unit at BRD, says that changing prices on the local market sometimes result into low gains for farmers, which is why agriculture is perceived by financial institutions as a highly risky area for financing.“Price changes affect production especially for crops that are consumed in the country,” she told Business Times in an exclusive interview on Wednesday.Central bank statistics show that commercial banks’ outstanding credit to agriculture was Rwf9.1 billion in the first three months of this year against Rwf25.5 billion for manufacturing, Rwf47.6 billion for the mortgage industry and Rwf88.8b commercial & hotels.Agriculture remains the biggest employer of Rwanda’s workforce.Umurerwa noted that other challenges such as climate change, and lack of improved seeds lower production, making it harder for financial institutions to extend credit to farmers.Farmers say that low production is due to low prices, which are usually determined by middlemen.“They (middlemen) set prices according to their wish and usually these prices do not even cover our input costs,” said Nzeyimana Fregence, a coffee farmer.He notes that farmers who are under cooperatives and have their processing units are better off since they have a collective voice in terms of pricing.Tilaye Nigussie, the Country Director of Concern – Rwanda believes that encouraging farmers to have direct access to markets would strengthen value chain and curtail current challenges.“There is need to consult farmers and come up with better approaches, the (farmers) know what they want,” he noted. He further noted that enhancing farmer resources capacity and training on new technologies would increase production. “Farmers have to value production than thinking about what they are supposed to eat so that they can have enough to take to markets.” Patrick Birasa, Program Advisor at Terrafina Microfinance said that current efforts to support financial institutions to extend credit to farmers will increase access to finance in the agricultural sector. “We are trying to help farmers to have their harvests as collaterals and extend support to Microfinance Institutions to be flexible in lending to these farmers,” he saidSuch interventions have changed the way commercial banks lend to agricultural sector with new policies that are likely to increase credit going to the sector.“We are not only giving them loans but we provide technical support to improve and increase their production,” Umurerwa said

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Price volatility holds back access to finance by farmers