The economic backbone of Zimbabwe is agriculture. An average of 15% of Zimbabwe’s GDP, 22.8% of export revenue, and around 23% of all formal employment are contributed by this industry. Prior to 2000, commercial farmers, whose land ownership rights were explicitly outlined in the Land Apportionment Act of 1930, had easier access to finance than the small-scale community agricultural sector, whose land ownership was vested in the state. As questions of land tenure, namely land ownership, transferability, and marketability become more complicated at the start of the 2000 Fast Track Land Reform Program (FTLRP), there was a significant policy change in the agricultural sector loan market.
Agricultural Financing and productivity in Zimbabwe
In the post-FTLRP era, the link between agricultural output and financing grew increasingly obvious. Much of the farm infrastructure and agricultural machinery (tractors, farm implements, etc.) were damaged after the FTLRP and left in a decrepit condition. The new indigenous farmers found it difficult to make the necessary investments in the sector to match the productivity of the pre-FTLRP era without significant financial support and aid to the sector. Therefore, after the FTLRP, the question of credit availability for Zimbabwe’s agricultural industry has become more pressing than it was before. Government must make a determined effort to develop a suitable system of land tenure that makes it simple for farmers to take out loans and make investments in their land. Financial engineers should investigate alternative agricultural financing models that enable farmers to obtain loans with the least amount of risk and expense to farmers in order to increase production.
High risk in agri-finance in Zimbabwe
Natural calamities, climate shifts, and unclear land ownership policies and a general lack of security all pose problems for farm funding. Natural catastrophes are becoming more common as a consequence of global warming, and Zimbabwe is particularly vulnerable to floods, hail storms, and cyclones. Not only is it difficult to foresee when such disasters will strike, but it is also difficult to quantify how much damage they will do. Obtaining insurance coverage for these perils and settling on an appropriate premium are parallel difficulties. Another problem is that farmers sometimes lack the land that would serve as the perfect security for loans from banking organizations.
The government of Zimbabwe owns all land, regardless of who is using it at the time, and the existing land tenure system does not allow for the transfer of land ownership. Due to the intricacy of land ownership and transfer, banks have a hard time providing securitized loans backed by real estate. Collateral in the form of crops or other movables is presently not accepted by most banking institutions due to central bank regulations.
Limits imposed by institutions
In the present economic climate, financial institutions, particularly those with a proclivity toward supporting agriculture (Agribank, to be more exact), are undercapitalized and experiencing liquidity issues. The government, which is Agribank’s stakeholder, is in no position to capitalize on the bank; hence moves are on to privatize it. The only catch is that, if it were to be sold to private investors, the country may abandon agriculture in favor of safer industries like mining.
Contract Farming in Zimbabwe
One of the most important ways that Zimbabwe’s agricultural sector has been able to get funding is via contract farming. Primarily, this has focused on cash crops like tobacco and cotton. Companies that specialize in contract farming work directly with farmers to help them with everything from planting to harvesting. They integrate into the agricultural lifestyle and community in a very real way. As a result, there is less of a chance that yields and harvests will be intentionally understated.
Lack of access to financing has plagued Zimbabwe’s agricultural economy from the start of the FTLRP. The impact of agriculture financing is felt in the form of a replacement of bought supplies and agricultural machinery for labor, with only a little impact on the sector’s technical advancement and productivity. Banks in Zimbabwe should make a concerted effort to carve out a position in the agricultural sector. Farmers in Zimbabwe will be able to increase their output if they are able to get the agricultural machinery from Tractors Zimbabwe, including farm implements, Massey Ferguson tractors for sale, New Holland tractors for sale, combine harvesters, etc.Tags: agriculture, farming, machinery, tractors, zimbabwe