US $2.4-million fund to help farmers access loans

The government of Rwanda is setting up a US $2.4-million fund for use by farmers as security to get loans from commercial banks, a senior government official told IRIN on Friday. The facility is expected to help farmers increase their productivity and, therefore, act as a hedge against poverty. The secretary-general in the Ministry of Finance and Economic Planning, Claver Gatete, said the government had so far set aside 300 million Rwandan francs ($400,000) for the fund. It is negotiating with the African Fund for Guarantee and Economic Cooperation to secure the remaining one billion Rwandan francs ($2 million), he said. Gatete said Rwanda's agricultural sector accounted for 90 percent of the workforce, and contributed up to 42 percent of the country's GDP. The African Fund for Guarantee and Economic Cooperation, in Cotonou, Benin, is a development funding agency serving mainly African French-speaking nations. It funds development projects and facilitates their implementation through subsidies or extension of the terms of credit. The Fund's members are Benin, Burkina Faso, the Central African Republic, Cote d'Ivoire, Mali, Niger, Rwanda, Senegal and Togo. Gatete said local commercial banks and finance institutions, which were already crippled by a large percentage of non-performing portfolios resulting from the 1994 genocide, had been hesitant to extend credit to farmers for fear of losses due to uncertainties such as bad weather conditions that determine the sector's performance. As a result, he said, statistics indicated that only 2 percent of the commercial banks’ loans had been extended to agricultural-related investment initiatives. "With that guarantee fund, the banks will not have any problems because initially giving loans to agriculture, which is dependent on weather and other external factors, was always considered as being risky," Gatete told IRIN. He added, "That's why the government made the decision to put in place a guarantee fund to minimise the risk and we hope this measure will greatly improve on productivity of the sector." He said that as a long-term measure, the move also aimed at fighting food insecurity that the country often experienced during periods of drought. In a bid to reduce the high poverty levels across the country and to reduce on a huge balance of payment deficit, Rwanda was diversifying its agricultural products to increase its export base, with coffee and tea at the helm, he said. Other agricultural products targeted in this effort include fruits and vegetables, cut flowers and pyrethrum.