Days of misery for Small and Medium Enterprises and Smallholder Farmers could end following an agreement between the Development Bank of Rwanda (BRD) and USAID to develop tailored products to increase agriculture financing.
Through its Private Sector Driven Agriculture Growth Project (PSDAG), USAID Rwanda will offer technical assistance to BRD to extend financing to investments in the agriculture sector.
PSDAG will bring expertise within the newly established agriculture department at BRD to close present gaps in the entire value chain.
This arrangement is the first of its kind for both partners to engage in. And the two-year memorandum comes at a time when BRD has just set aside US$390 million to expand its agricultural and export portfolios.
US$170 million will finance businesses in agro-processing, mechanisation, modernisation and agro-input technologies. US$220 million will be used to finance the export sector, including agro-exports.
“The bank provides finances, but gaps continued to remain and new risks emerge in the sector…yet we want to create a sustainable private sector…” Says Alex Kanyankole, BRD Chief Executive Officer.
“We want to provide the agricultural sector with very tailored access to finance so that the SME and farmers can access capital that is affordable and in a way that is conducive to making their products competitive,” says Melanie Bittle Chief of Party for PSDAG.
The bank, which invested Rwf10 billion in the sector in 2016, says it is a timely boost to the efforts of financing development and modernization of the agriculture sector.
Kanyankole said at the signing ceremony that the bank after spending Rwf10b last year, it intends to increase financing to Rwf10billion in 2017, Frw22billion in 2019 and Rwf33 billion in 2019.
“As we embark on increasing lending and access to financial services to the sector, it is essential to provide technical support and capacity building to our staff and clients” Says Kanyankole.
Specifically, eligible investments could include livestock production, feeds and forage and fish production.
Export, inventory credit or warehouse receipt financing, forward contracts arrangement and insurance products will also benefit from the facility.
Additionally, Micro-finance Institutions (MFIs) and SACCOs will receive funding at lower interest rates designated for smallholder farmers, but the bank has not divulged into details yet.
This will be the first time a financier develops non-traditional lending tools that are sensitive to special needs of the targeted audience.
Initially, BRD used to engage in lending directly to commercial agribusiness, but in 2015 it restructured and developed a new strategy that works through local partner micro-finance institutions to empower and enable them to invest in agriculture.
In simple terms, according to Melanie Bittle, whose project ends in 2019, “They [BRD] have access to the money, and we have access to the expertise.
“We are creating more space and increasing lending,” says CEO Kanyankole. “They are helping us to ensure everything is in place.”
VIDEO: BRD Signs Deal with USAID