Revitalizing agriculture through tailored financing, smart partnerships

By Graham Chipande

Love or hate it, agriculture remains the goose that lays the golden egg for Malawi. The sector is so firmly intertwined into the various sectors of the country’s fabric so much that any disruption in agriculture value chains has ripple effects on the economy. And ultimately our national development.

The role of the sector in providing food security, livelihoods, and foreign reserves stabilization, therefore, remains indispensable. The key question to answer is how do we sustain the sector to keep the goose laying the golden eggs?

Harnessing the readily available potential in the agriculture sector is part of the answer. To achieve sustainability in the sector, we must continuously develop innovative ways of boosting it as a source of both food and national income.?One of these ways is to ensure that the sector is well financed.

Financing the agriculture sector in Malawi has not been devoid of its own challenges. One of these is the predominantly informal nature of the sector. Majority of the farmers are rural smallholder farmers who work on small acreage, with no land tenure. Most are not formalized. ?With problems such as drought, flooding, pests, and poverty, smallholder rural folk do not farm sustainably and therefore represent the biggest risk to potential funders.

Many smallholder farmers are now moving up the ladder to join strategic alliances that are in ecosystems with finance institutions, including banks. According to the International Finance Corporation (IFC), building strategic alliances among banks, technology providers and agribusinesses is helping reduce lending costs and mitigate credit risks. On the other hand, banks now have access to a battery of scoring models and digital applications. Combined with big data, such models are helping to reduce the cost of financing the sector significantly.

?Working with multiple players to finance the agricultural sector is helping to increase the credit supply to the sector significantly. The model has in recent years benefitted small-holder farmers belonging to cooperatives to gain access to credit. This credit has been used to boost output for select commodities such as soybeans, red beans, groundnuts, and vegetables in Mchinji, Lilongwe, and Mzimba. The positive results from this venture are ready to be scaled up and replicated nationally.

Across the continent Standard Bank Group has formed partnerships with local farmer associations and cooperatives, relevant UN agencies and international aid agencies, to boost the agricultural economies, and improve livelihoods. Specifically, we partnered with UN Women through a Climate Smart Agriculture (CSA) program in Nigeria, Uganda, South Africa and Malawi. This 3-year program aimed to empower women through modern farming technologies to increase productivity and incomes while reducing greenhouse gas emissions. Closing the gender gap in agriculture would generate significant gains for the agriculture sector and for society.

The country’s long-term development blueprint, Malawi 2063, touts agriculture productivity and commercialization as a catalyst for job and wealth creation. ?With that in mind, investments in the agriculture sector are now being aligned to competitive agricultural value chains that will yield quick and sustainable gains for the country’s economy.

During the 2022 Agriculture Productivity and Commercialization Conference in Lilongwe, Minister of Agriculture, Lobin Lowe, observed that farmers in the country need to be equipped with skills, agricultural technologies, extension services, and other appropriate public infrastructure and services for them to produce a wide variety of high-quality agricultural products for local and international markets.

Making capital available for all these activities in the agriculture sector will take greater collaboration between government and the private sector.

Banks have a huge stake in helping the Malawian farmer realize new frontiers of benefits from their toil. All the way from farm to fork, Malawian farmers are looking for opportunities that will transform their lives at household and community levels. Financial institutions must rise to the task and provide support comprehensively.

Malawi, therefore, becomes a good candidate for such interventions mainly because of its status as a third-world economy that has largely relied on subsistence farming.

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There must be deliberate support towards smallholder producer organizations and cooperatives to increase productivity, and diversify the export and food base through various interventions such as use of modern technologies. Financing institutions, as is the case should invest in productive capital assets to mechanize smallholder agriculture in the country.

Agriculture will continue to determine the size and stature of the Malawi economy. If the country gets the financing aspect right, then possibilities of an inclusively wealthy and self-reliant nation by 2063 are well anchored in.

*Graham Chipande is the Head of Business and Commercial Banking at Standard Bank Plc