HARARE, February 4 (The Source) – The government controlled Agricultural Development Bank of Zimbabwe (Agribank) remains severely undercapitalised after it was allocated $4 million in the 2014 national budget, much lower than the $50 million it requires to recapitalise, an official said on Tuesday.
The bank was set up as the government’s primary vehicle for channelling financial resources to the agricultural sector, but the state had failed to provide the funds.
“The bank is undercapitalised and does require urgent recapitalisation,” the chief executive, Sam Malaba told the Parliament’s Agriculture Committee on Tuesday.
“We submitted a request of $50 million to the government and as of now there is only $4 million that was allocated to the bank.”
Malaba said the bank needed to raise its capital levels to $150 million from both government and private sources to boost its balance sheet and attract lenders.
Two years ago, he said, government had agreed to privatise the bank and to cede a 49 percent stake to strategic partners but the matter was still pending after a due diligence was conducted last year.
Malaba said the bank was currently using private borrowings to lend to farmers at high interest rates.
In response to a question by ZANU-PF MP for Makoni South, Mandi Chimene on how much the bank had spent on agriculture the 2013/2014s season, Malaba said Agribank and FBC had managed to raise $4.5 million through Agriculture Bills and a loan from the National Social Security.
He said during the 2012/13 agricultural season, the bank disbursed $12 million which it had secured from government but a number of farmers had failed to repay.
Responding to questions from members of Parliament, Malaba said most farmers were failing to access loans due to undercapitalisation and the shortage of funds in the economy.
“The funds we have are commercial based and therefore we are forced to lend at commercial rates,” he said.
He said the bank was lending at 4.5 percent on government funds and 10 percent on commercial loans.
“The issue of free seed, fertiliser does not encourage one to be productive and one is not motivated to produce.
“I think for it (agriculture) to succeed, it’s incumbent on government to ensure that Agribank is adequately capitalised so that it can meet the requirements of farmers on a commercial basis.”