The African Guarantee Fund for Small and Medium-sized Enterprises (AGF) and Tanzania Agricultural Development Bank (TADB) have inked a US $20milli0n Memorandum of Understanding (MoU) for agribusinesses in the country.
The commissioner for financial sector development from the Ministry of Finance and Planning, Dr Charles Mwamwaja witness the signing ceremony and said the the partnership was a boon to Tanzania’s Third Five-Year Development Plan (FYDP-III).
The Plan seeks to increase the country’s capacity for production; building a competitive economy that would stimulate Tanzania’s participation in trade and investment; and stimulate human development. According to the agreement the disbursed loan will enable the bank to guarantee SMEs in the agri-value chain in applying directly for loans at the bank. Despite the fact that SMEs constitute 95% of all businesses in Tanzania and between 35% and 50% of the country’s Gross Domestic Product (GDP) – they were still finding it difficult to access bank loans.
“Most traditional banks and financial institutions require collateral valued at between 125% and 150% of the loan amount being applied for. The MoU will help agri-SMEs to access more financial support at affordable cost and, ultimately, contribute to the transformation of agriculture, the economy and the lives of Tanzanians,” said Dr Mwamwaja.
Affordable lending conditions
TADB managing director Japhet Justine said the partnership gives his bank room for lower interest rates and lending conditions that are affordable and, therefore, friendly.
“Our Integrated Value-Chain Finance (IVCF) model that we have adopted also ensures that a wide-range of agri-SMEs are compatible for this loan product. Our bank aims at empowering the SMEs involved in different stages of the agri-value chain, including inputs, infrastructure, production, storage, processing, transportation and markets,” he said.
AGF Group CEO Jules Ngankam said the MoU signalled a strategic partnership between the two organisations in achieving significant impact within the SME sector in Tanzania.
“While this partnership is of great importance to SME owners and prospects in Tanzania, it is also a trailblazing opportunity for women-led or owned businesses. Through the Affirmative Finance Action for Women in Africa (AFAWA) partnership that my organisation has with the African Development Bank Group (AfDB), AGF will also be able to extend the AFAWA Guarantee Facility to TADB in helping to increase financing of Tanzanian women-owned agri-businesses,” he noted.
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