Agriculture development banks are bad for business- expert

Last Updated on Thursday, 5 November 2015, 23:36 by GxMedia

As Guyana prepares to reintroduce an agricultural and industrial development bank, an agri-financing expert at an intra-regional financial agency says such financial institutions make no sense and discourage the growth and development of agricultural businesses.

“No, I don’t think it’s a good idea. There are many, many subsidies on that type of subsidized schemes. Basically, if you make money too cheap, it will be people with power who will fight to get that money so the money doesn’t go to the farmers who really need it,” Manager of Policies, Markets and Information Communication Technology (ICT) at the ACP-EU Technical Centre for Agricultural and Rural Development (CTA), Lamon Rutten.

Currently attending the Caribbean-Pacific Agri-Food Forum being held in Barbados, he said agricultural development banks have contributed to the poor state of agriculture.

Rutten stressed that if farmers could not borrow at an interest rate of eight percent, then they are not good farmers who are “bankable.” “Banking is a business and it should be a profitable business and it can be a profitable business. If you are a good farmer, you can make good profits; you can make honest interest rates. People who require subsidized interest rates are not encouraged to improve the economics of their business,” he said.

The CTA official recommended that subsidies be ploughed into the training of farmers in the use of better technologies, seed research and distribution, providing risk coverage for natural disasters like hurricanes and droughts and providing market information. In the Caribbean, he said farms are producing comparatively lower yields and so the challenge is to provide seeds that could produce as much as four times their current output.

Another area of priority for Caribbean governments, he said, should be the acquisition of a ferry service to transport produce among the scattered countries separated.

At the same time, he said smaller borrowers should be able to borrow from regular commercial banks after the required due-diligence would have been applied. “As an agri-business company, the bank will really want to know that you are profitable and you have to make that case and you can really only make that case nowadays if you try t really reach the highest standards,”

The recently-elected Guyana government recently announced that plans are in train to revive the Guyana Agricultural and Industrial Development to help stimulate mainly agriculture and create jobs.

Across in St. Vincent and the Grenadines, the government there two years ago established the Farmers Support Company that was capitalized with $6 million Eastern Caribbean dollars. Loans are offered at an interest rate of two percent. As that country heads into general elections, the opposition has promised to convert all loans to grants.

Rutten emphasised that farmers could be profitable if they use the right technologies and take advantage of high-priced markets for their produce and value-added products.“If you don’t meet those requirements, you would be selling your goods in pretty bad markets, getting low prices, difficult to be profitable,” he said.

The Caribbean-Pacific Agri-Food Forum and the Caribbean Agri-Business Forum has drawn participants from across this region and the Pacific. They are sharing challenges solutions with the aim of boosting the production of nutritious foods for domestic and local consumption, creating jobs for youths and women, and supporting tourism.

The CTA is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). Its mission is to advance food and nutritional security, increase prosperity and encourage sound natural resource management in ACP countries