Government has given the green light to State-owned Agriculture Development Bank, Agribank, for it to start scouting for a strategic partner, who is expected to inject US$25 million in additional capital as part of initiatives to strengthen the bank’s balance sheet.
This comes as the bank is targeting more capital injection for it to attain the Reserve Bank of Zimbabwe tier 1 bank capital of US$100 million by 2020 as well as a strong balance sheet to execute its mandate of supporting agriculture, the nerve centre of this economy.
Agribank chief executive officer Sam Malaba said the State-owned entity was already in consultations with Government ministries for the engagement of a strategic partner.
“Government has allowed the bank to look for a strategic partner. We are now working with Government ministries for engagement of a strategic partner. That will strengthen the balance sheet and capital of the bank.
“Right now the bank’s capital stands at about US$75 million, we intend to be able to reach US$100 million by the end of 2019 but further to that we need additional capital through a strategic partner because what we need is medium and long-term financing.
“In terms of short term financing, we have that through deposits but what is required is medium to long-term financing and we want the strategic partner to put that kind of financing as well as
being supportive within the agricultural sector.
“We are happy with the progress made and the green light given by Government for us to engage a strategic partner,” said Malaba.
According to a study conducted by the Zimbabwe Land and Agrarian Network (ZLAN) commercial lending to the country’s agriculture sector remains heavily subdued with only 8 percent of farming activities being financed by financial institutions.
The study highlighted that majority of farming activities were being funded through contract farming arrangements.
Zimbabwean farmers have been finding it difficult to access credit from banks because they do not have security.
While the Government has issued 99-year land leases to some small and large scale farmers, most financial institutions have rejected them.
However, Finance and Economic Development Minister Mthuli Ncube said Zimbabwe is prepared to provide guarantees to banks that will be financing agriculture to help plug the funding gap to the sector.
The finance chief said the move is part of broader efforts by the Government to crowd in private sector funding into the agriculture sector.
While the model is not too different from the Command Agriculture through which the private sector would pre-finance farmers with the Government providing guarantees, credit would now be extended based on bank’s risk assessment.