MoA drafts plan for bank formation

Aimed to support small and medium farmers’, the Ministry of Agriculture (MoA) submits its final draft plan to the micro economy team for the formation of the agricultural policy bank.
The agricultural bank is expected to be formed mainly with the aim to expand access to finance for the sector that has been working on the plan for the last three years starting from pointing out problems and solutions on the sector.
On the formation of the bank which is expected to be named as Cooperative bank, different stakeholders are participating including the federal cooperative agency, according to Director General of the Federal Cooperative Agency Usman Surur, who said that the sector is denied adequate finance compared with other sectors. “The sector is the major source for the economy but it is not supported when it comes to finance,” he indicated highlighting that besides an exclusive bank for the sector, cooperative banks should be established to support the sector and improve financial inclusion.
According to data from the total loan disbursed in the country, the agriculture sector only secures less than 10 percent.
The reform strategy identified that the agriculture policy should consider the supply and demand side together with the formation of the bank which will also add an optional financing scheme like warehouse receipt and contract farming. Change to the supply and demand side, improving the market linkage and grading of products is also stated as a crucial point to modernize the sector and encourage the actors.
As Usman said, the government has been working on the plan for the last three years starting from pointing out problems and solutions on the sector and in the coming New Year after the formation of new government this will become reality.
The NBE first quarter report for the 2019/20 fiscal year indicated that 39.6 billion birr was disbursed in fresh loans, while the agriculture share was 4.1 billion birr or 10.3 percent of the total amount.
From the total outstanding credit of the banking system that was 574 billion birr in the first quarter of the budget year, the agriculture sector only took 18.7 billion birr or 3.6 percent.
Ethiopia has 16 million farmers including pastoralists that are still engaged on poor productivity. From the total farmers most of them own land less than half hectare.
As experts explain, in Ethiopia 80 to 90 percent of food production is from the small farm sector, credit, along with improved financial instrument must be provided in a form that can serve these farmers. They in turn, must increase production to keep pace with the productivity of urban population and this requires the application of expensive technology.
According to the director, the bank could consider the linkage of urban to rural, since formation of rural towns improves the agriculture sector.