Caribbean agriculturalist supports low-interest loans for farmers

Last Updated on Friday, 6 November 2015, 22:03 by GxMedia

A veteran Caribbean agriculturalist Friday disagreed that agricultural development banks offering subsidized interest rates do not help farmers to grow into big businesses, even as he cautioned Guyanese authorities against poor management of its agri-financial institution when it comes on stream.

“I will tell them to stock it with agriculturalists who understand agriculture and not necessarily people who only have a degree in economics… You need people who understand the production systems that they are going to supervise,” said Steve Maximay who is attending the 2^nd Caribbean Agri-Business Forum in Barbados.

He made known his position in support of agri-development banks , one day after Manager of Policies, Markets and Information Communication Technology (ICT) at the ACP-EU Technical Centre for Agricultural and Rural Development (CTA), Lamon Rutten said such institutions make no sense and discourage the growth and development of agri-businesses.

He said based on his experience with the now defunct Guyana Agricultural and Industrial Development Bank (GAIBANK) “you can’t go wrong if it is properly managed and if it is well-run.” The David Granger-led administration has announced plans to re-establish GAIBANK.

Maximay, who has worked with agri-development banks in Guyana and Jamaica, acknowledged that some of GAIBANK’s funds might have been misused because government money is often regarded as funds that ought not to be repaid.  In that regard, he urged the Guyana government to run a professional financial institution.

He said generally speaking there is political interference in the management of such financial institutions characterized by ministers requesting assistance on behalf of their supporters.

Now an agricultural consultant across the region, Maximay said farmers should not be allowed to get away with bogus explanations when they take government loans and do not produce.

Maximay said he disagreed that agricultural development banks should not offer loans at interest rates lower than commercial rates, saying that it goes against the philosophy of a development bank. He said the strength of the agri-development banks was based on the actual appraisal of projects. “You can’t leave everything to market forces. That has been shown time and time again and we are discussing this in the context that agriculture is subsidized all over the world, whether the subsidies are hidden, overt or covert,” he said. Hidden subsidies, he said, could include free transportation or hassle-free processing of exports.

Weighing in on Rutten’s view that subsidized interest rates act as  a disincentive to small farmers becoming big businesses that can supply premium markets with produce that meet international standards. The CTA official said once farmers grow their businesses the amount of interest on loans would be of little concern. “I fail to see logic in that, to be quite honest. Subsidized credit is feature of life in all industries,” he said.

Maximay noted that when tourism projects  secure concessions, they are really deferred subsidies, but on the contrary “why should farmers, who are food producers, be paying inputs duties on inputs.”  Maximay said there is sufficient evidence that low-interest loans have helped agri-businesses to grow.

Rutten has said that studies have also shown that it would be the large rather than small farmers who would take advantage of low-interest loans.

St. Vincent and the Grenadines two years ago introduced a development bank that offers loans at an interest rate of two percent.