Agriculture employs more than 70% of the total population in Rwanda. As outlined under the Vision 2020 and EDPR II targets, agriculture is expected to play a critical role in poverty alleviation efforts and overall economic prosperity through job creation and supporting key industries.
The main focus of Agricultural Department at BRD is the provision of financing for the development and modernization of agriculture sector. Through consultations with
stakeholders and strategic reviews, BRD has identified three key constraints on which to focus in order to increase agro business related activities and to unlock the agriculture financing ecosystem and maximize the potential of the agricultural sector.
BRD will have an important role to play in supporting the ongoing efforts in the agriculture sector, specifically financing private sector investments. Implementation of interventions under the bank’s Agricultural finance pillars will aim at helping the sector reach the annual growth rate of 8.5%, increased fertilizer application (kg/ha/annum), increased banking sector portfolio to agricultural sector.
The Bank has designed three targeted interventions to alleviate some of the binding constraints in agriculture which include Supporting agro-processing Industries, Provide Risk Management Programs and Mechanization
BRD will partner with key stakeholders in order to successfully implement interventions in
- Agriculture Mechanization,
- Investments in risk mitigation mechanisms.
The total budget from the Bank (debt + equity) will be $170 million over the course of 5 years. This is expected to trigger more than $24.7m worth investments from the private sector. Interventions that will be undertaken by BRD will take different structures. In some cases, BRD will provide loans to companies, in other cases the financing will be in forms of matching grants, technical assistance, equity investments, and guarantee facilities.
Agriculture Modernization and Mechanization:
In its new Strategy, BRD’s modernization program is to focus on enabling irrigation and broad mechanization investments. This will include enabling modernized distribution of inputs and providing leasing for mechanization equipment.
As Rwanda aims to have at least 100,000ha of land irrigated by 2018, BRD will contribute to this objective by providing debt financing to cooperatives and other investors carrying out irrigation projects. BRD financing will also be done through refinancing as an indirect means to reach investors at a micro level.
Agro-Processing Development Program:
BRD intends to launch an agro-processing development program designed to strengthen linkages in agriculture value chain. This program targets the whole value chain including cooperatives of farmers, distributors of inputs and agro-processors.
In addition to contract farming, this program will also fund targeted value chain research activities, specific linkages initiatives and value addition projects initiated by farmers. This could include training and capacity building for the farmers. This program will require an investment of $10.4million from BRD account throughout 5 years.
To boost the production of farmers in both quality and quantity, BRD will provide capital to finance distribution of inputs. The inputs will mainly include fertilizers, and will be expected to contribute to the achievement of the national objective of fertilizer application (kg/ha/annum) of 45 in 2020
BRD will provide of equity and debt capital to investors involved in agro processing. This will provide greater alternatives for suppliers while also boosting both exports and job creation. In total financing to agro processing industries is estimated to reach $92million over the course of 5 years.
Risk Mitigation Mechanisms:
The agriculture risk mitigation program aim at minimizing and mitigating risks associated with the financing of agriculture projects. The focus will be on both crop yield and revenue covering the following areas:
- Farm productivity levels;
- Reduced post-harvest losses;
- Suitable prices and conditions;
- Quality control and inspection of commodities.
BRD’s depth of reach in the agriculture sector will enable it to provide much needed data to the insurance providers and provide support where it’s appropriately needed.