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Meeting The Demand For Mechanization Financing In Zambia
Farmers of all sizes rely on appropriate mechanization solutions to increase the productivity, profitability and sustainability of their operations. To acquire these technologies, both large and small producers need access to affordable financing. While most large-scale producers have the security they need to obtain agricultural financing, smallholders are less likely to have land tenure or financial histories, which makes accessing those solutions more challenging. This is particularly true in sub-Saharan African countries such as Zambia where access to affordable financing is a major stumbling block preventing smallholder farmers from reaching their potential.
According to a report authored by Dalberg Global Development Advisors, Catalyzing Smallholder Agricultural Finance, the market demand for smallholder agricultural financing is estimated to be as much as $450 billion USD, most of which remains unmet. This lack of access to finance prevents smallholders from acquiring new technologies, resulting in outdated farming practices and lower levels of productivity. Given the critical role smallholders must play in meeting the global demand for food security, this unmet demand reveals a significant opportunity.
The 2015 GAP Report® highlights the importance of finance to the growth of the agriculture sector and features a number of collaborations and innovative financing programs available to Zambian farmers, including affordable loans which will help them acquire the latest farm equipment and technology to boost their yields, and, in some cases, the yields of their communities.
John Deere Financial, working in collaboration with local banks, is offering improved access to credit and addressing the cost of credit for emerging farmers and mechanization contractors who hire out their equipment and services to neighboring farmers. To further build capacity, the farmers and contractors are receiving business, farm management, agronomy and operator training to enable them to run successful businesses, ultimately increasing their agricultural output and household incomes.
|“With innovative finance solutions, John Deere aims to support the existing emerging commercial and contractor segment and to develop new contractors to serve the smallholder farmers allowing them access to mechanization technology via a contractor model,” Jacques Taylor, the John Deere Financial Sub Saharan Africa Managing Director.|
AFGRI, a John Deere dealer in Zambia, implemented a Tractor for Maize scheme supported by Musika, a Zambian nonprofit company that works to stimulate private sector investment in smallholder markets. The Tractor for Maize program extends farmers three year leases and allows for seasonal payments in the form of maize crops. It was through this program that Justine Kateya of the Matuka village in Zambia purchased a tractor. He was not only able to boost his own production, but he quickly became a reliable mechanization service provider in his community and hired additional workers. During the 2013-2014 farming season he provided services to more than 65 farmers, plowing and planting a total of 200 acres and 50 acres, respectively. Read the full story in the June 2015 edition of Musika’s eNewsletter (page 8).
This creative and market-relevant financing arrangement is one example of how the mechanization industry is beginning to meet the demand for agricultural financing, enabling smallholder farmers like Justine Kateya to become more productive and resilient.