Improving Agricultural Income and Employment in Zimbabwe
AgriTrade is a USAID-supported commercial lending facility that links farmers and agribusinesses and results in significant increases in income for smallholder farmers. In the past, credit available to the agriculture sector has been limited to agribusinesses working with large-scale farmers or to government schemes targeting particular farmer groups. AgriTrade has changed that by providing loans to agribusinesses that establish contract farming arrangements with smallholder farmers, buy smallholder farmers’ produce, market agricultural inputs in communal areas, or purchase equipment for processing smallholder farmers’ produce.
Through AgriTrade, USAID’s investment of US$5 million will generate US$40 million in loans. This is because USAID funds are matched by participating financial institutions, and loans that are repaid are lent back to agribusinesses working with smallholder farmers. AgriTrade was established in May 2011 and avails loans ranging from US$1,000 to US$200,000 through three financial institutions: Trust Bank, Central Africa Building Society (CABS), and MicroKing Finance (a microfinance company). Local banks may compete to become part of the program.
As of January 2012, AgriTrade had disbursed US$5.2 million through 746 loans across Zimbabwe. These loans are expected to result in over $10 million worth of produce purchased by smallholder farmers. AgriTrade borrowers buy produce from smallholder farmers, sell it to their clients, and return to communal areas with the revenue to buy additional produce. The majority – 82 percent – of these loans are under US$5,000 and are given to small rural businesses, including traders, butcheries, and processors, increasing the competition for smallholder farmer produce. The use of loans is closely monitored and are used mainly to buy cattle, maize, potatoes, cowpeas and legumes, and inputs.
To ensure sustainability of the facility, AgriTrade is led and marketed by participating banks. International Relief & Development (IRD), under a contract to Fintrac Inc., works with the banks to adjust their risk assessment processes to the target clientele, refers borrowers to the banks, builds the capacity of the borrowers to apply, and monitors the performance of the borrowers. IRD is helping to establish and strengthen market linkages between input producers, wholesalers, and agro-dealers, as well as among smallholder farmers, middle-men, processors, and exporters.
Slated to run through February 2015, AgriTrade is implemented within the broader framework of the Fintrac-managed and USAID-funded Zimbabwe Agricultural Incomes and Employment Development (Zim-AIED) program. Zim-AIED aims to increase incomes and food security of smallholder farmers and generates income and rural employment for agro-businesses through increased agricultural production, productivity, agro-processing, and investment.