AgriBank Aims to Catch Up With Applications

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By Wezi Tjaronda WINDHOEK Namibia’s agricultural bank says that although the moratorium on the Affirmative Action Loan Scheme was lifted last year, it will not issue AALS loans until such time as it has cleared the backlog of N$17.2 million. New Era understands that since then an estimated 200 new applications have been made to the bank, which cannot be financed until the backlog is cleared. “This is in line with the board resolution not to entertain new loans due to the fact that the annual budget has been completely been exhausted”, said the bank’s Chief Executive Officer, Leonard Ipumbu, in a press statement yesterday. The government, through the Ministry of Finance, slapped a moratorium on the loans in November 2004 to allow the bank to review and redesign the process of financing the buying of land whose asking price was higher than the agricultural fair value – making it unaffordable to the bank. Because of this, it would be next to impossible for the beneficiaries of the scheme to pay the hundreds of thousands of interest that many farmers owed the bank. Ipumbu said yesterday the institution has had a huge backlog of loans it had approved but not disbursed since 2004, when the moratorium was put in place. Out of the N$42.18 million that the bank owed to its clients due to loans that had been approved, N$24.98 million has so far been cleared, with a balance of N$17.2 million still to be paid out to its clients. The N$24.9 million was used to award loans to 47 clients, 13 of which were AALS clients to the value of N$14 million and between N$3 million to N$4 million was loaned out for the purchase of livestock with the rest used for production loans such as improvements to the farms and labourers’ houses. Ipumbu said the bank would concentrate on clearing the backlog, and production loans, which are smaller loans for buying seed, tilling of the land, harvesting, buying fertilizer and overhead costs, among others. The moratorium was lifted in June 2005 after the Technical Review Committee’s proposal of the new formula was accepted, but is yet to be adopted by the Cabinet. The new formula puts emphasis on affordability and sustainability based on the production capacity of the farm and not the cost of infrastructure that cannot be sustained by the income derived from farming. It has been noted that farm owners put up infrastructure such as swimming pools and posh houses, which cannot be sustained by the income from the faming venture. The bank has thus decided to look at the income that the land can produce to sustain the farmers when the farm is purchased. In June last year, Finance Minister Sara Kuugongelwa -Amadhila urged the bank to cut its default rates by looking into the quality of loans, reviewing the process and monitoring the loans. “I would be happy not to hear of any more repossessions”, she said at that time hinting that repossessions are worrisome and impacted negatively on the land reform process.” The situation in which the bank gave the new farmers more money than they needed for buying the farms led to higher chances of repossession. Because of this, the minister called on the bank to address the farmers on any liabilities before they could take any loans as well as to look into the possibilities of rehabilitating loans in cases of bad debt. Due to the fact that most AALS farmers struggle to make a success of farming because of limited skills and lack of production capital, the minister said production loans would come in handy.