In Tanzania, the share of loans to the agriculture sector as a percentage of total loans extended by commercial banks used to be around 40% (in 1994). While the banking industry continues to grow steadily since reforms began in the 1990s, the percentage of agriculture-based loans dropped to 6% in 2018.

Hadija Jabiri, CEO of GBRI, a Tanzanian company that grows vegetables mostly for export to Europe, says she is part of this statistic. “I’ve been in the agriculture industry for around six years and even though I wanted to obtain financing from the normal financial institutions when I started, I couldn’t.” She was met with closed doors everywhere as the banks insisted on assets as collateral, of which Jabiri had very few at the time.

To grow her business, she had to turn to development finance initially, highlighting the job creation and economic impact GBRI would bring about.

“Perhaps this presents an opportunity for someone to come up with customised products that fit the needs and circumstances of farmers in Tanzania, especially the smallholder farmers. It could be a very good business.”

Jabiri found the banks did not understand the difference the choice of crop makes. “Avocado production is quite different to vegetable production. The latter takes around seven weeks from planting to when you can generate an income from the harvest for repayment purposes. Whereas avocado production takes three to four years from planting that first seedling,” she says. These are the contextual elements that financiers should take into consideration.

Jabiri mentions new solutions that offer small mobile money-type loans based solely on a person’s ability and track record to pay back the loan, rather than assets or available collateral.

“The more regularly you pay, the more your limit rises. If you don’t pay within your agreed timeline, the interest rate for your next loan increases. They are looking purely at your ability to pay back and that is ideal,” she explains.

“There are huge untapped opportunities in the agriculture value chain and customised agro-financing is one of these.”