Raising financial resources in Africa remains one of the biggest impediments to the growth and sustainability of agriculture - especially in Tanzania, which is one of the countries with the brightest prospects to boost agricultural productivity in the Continent. Tanzania Agricultural Development Bank's Managing Director outlines how the Bank is seeking to change this narrative
The transformation of Tanzania’s agriculture sector offers huge opportunities for acceleration of job creation, economic growth and poverty reduction – in a country with vast land resources, adequate water and fertile soils.
Looking at key figures closely, the opportunity for Tanzania’s agriculture is vast.
The East African country has 29.4 million hectares of irrigable land but only about 2% of this is irrigated. It is also endowed with over 25.8 million cattle, 17.1 million goats, 9.2 million sheep, apart from being an important producer of fruits and vegetables, cotton, coffee, tea, sisal, cereals, tobacco, nuts (such as cashew) and oilseeds such as sunflower. Further, with about 62,000 square kilometers of fresh water resources and a long coastline, all available for fisheries development, Tanzania must surely be able to feed itself, with adequate surplus to trade with the rest of the World.
According to a 2019 report by the World Bank, recent positive trends, for example, a notable rise in the number of medium-scale farmers “offer a tremendous opportunity to catalyze private investment, both local and foreign, and raise the incomes of the poor. Since agriculture already accounts for a quarter of total GDP and two-thirds of jobs, enhanced agricultural growth must be part of the strategy to create more and better jobs and alleviate poverty,” said Bella Bird, World Bank Country Director for Tanzania. The report reiterated the importance of having supportive public policies and spending, which crowds in more private investments needed to catalyze nascent agricultural transformation in the country.
According to the World Bank and analysts, Tanzania has vast potential for mechanized agriculture, aggregation and value addition, modern post-harvest management technologies and in agro-processing of its huge agricultural production that is mainly exported in raw form, leading to exportation of an estimated 100,000 or more jobs.
Facing up to the challenge
One such organization that has the mandate to facilitate the growth and transformation of the agriculture sector in Tanzania is the Tanzania Agricultural Development Bank (TADB).
TADB is the apex national-level Development Finance Institution (DFI) vested with the mandate of financing the agricultural sector in Tanzania. “Our role is catalysing credit delivery to agriculture and thereby accelerating the sector’s growth. Our operations are both commercial and developmental in nature, and are carried out under the provisions of Acts and Regulations governing the banking and finance sector; particularly development finance regulations administered by the Bank of Tanzania,” says the Bank’s Managing Director, Japhet Justine.
Justine discloses that agriculture is an important ingredient in Tanzania’s economic and industrial transformation, adding that the country is already the breadbasket in the East African region, and has great potential to supply to other countries beyond the region as well. “With the current rate of population growth and rapid urbanization, the opportunities that Tanzanian agriculture offers are enormous. With the right investments and scale, we can sure take up the opportunity to expand and be an important supplier of agricultural and food products to the rest of Africa and beyond.”
TADB, which is celebrating its 5th year anniversary in 2020, aims to facilitate the achievement of two broad goals: facilitating the attainment of sustainable food self-sufficiency and security in Tanzania; and driving the transformation of agriculture from subsistance to commercial in the country, in order to effectively and sustainably contribute to economic growth and poverty reduction.
According to Justine, as a national level DFI, the Bank is responsible for leading resource mobilization initiatives for financing agriculture and facilitating financial inclusion of small-scale farmers, along with leading capacity-building strategies for strengthening agriculture value chains. It plays an active role in supporting the Government to shape and implement policies for agricultural and rural transformation, with such undertakings carried out within the context of national agriculture policies, strategies and programmes, particularly the Agricultural Sector Development Programme (ASDP). He underlines that to build a lasting impact in Tanzania’s agriculture, the Bank priorities are long term in nature, with a focus on four key strategic objectives.
One key strategy the Bank utilizes is facilitating greater access to inputs and mechanized technologies by small-scale farmers across the country. “Our strategy around this has been supporting farmers through their organizations by issuing short-term loans for purchase of inputs such as improved seeds, fertilizers, and pesticides; and medium term loans for purchase of mechanized technologies such as tractors, planters and combined harvesters.” The Bank also supports farmers through its credit guarantee scheme, SCGS, where it has facilitated greater access to inputs by over 1 million farmers and enabled the purchase of 73 tractors, planters and combined harvesters by farmers since its inception. The Bank’s objectives around this priority are closely intertwined with its objectives of spearheading financial inclusion of small-scale farmers and the rural sector in general.
The second strategy is developing functioning markets for agricultural commodities, where the Bank supports the aggregation of harvested crops from smallholder farmers through their associations and cooperative unions, and linking the unions with larger markets. “Our work around this priority is done in collaboration with other important players including the Tanzania Mercantile Exchange and the Warehouse Receipt Regulatory Board.” He reveals that this strategy has worked very well. In the coffee sub-sector they have revived three defunct cooperative unions in the country’s largest coffee producing region of Kagera, where, during the past three seasons starting 2018, they have injected around TZS 69 billion (about US$30 million) to support operations of the important sector.
The Bank’s third priority is supporting agro-processing and value addition of agricultural produce in the country. He explains the importance of this strategy, adding that for many years, Tanzania has been exporting raw produce to markets abroad, a situation representing huge missed opportunities in terms of the value of exports and employment. “It is important for us to develop the country’s capacity for agro-processing as a sure way to create reliable market arrangements for small-scale farmers supplying to local processors. Our focus, therefore, is to reverse this by supporting investments in agro-processing factories that add value to various crops. We are proud to have funded investments in over 24 agro-processing facilities in various regions across the country over the last 5 years,” he reveals.
In this regard, the Bank has started to build the momentum in bringing together stakeholders in various value chains to build local capacity and drive investments in agro processing. In February 2020, the Bank had a successful forum aiming to close the demand gap in the edible oil subsector that brought together players from the banking sector, insurance companies, development partners, research institutions, input suppliers, processors, and Government ministries and agencies to discuss opportunities for developing products and appropriate policy package to attract investments in the sub-sector. Justine says that he believes that through these kinds of partnerships, TADB can work together with partners to deliver on the country’s agricultural transformation agenda.
The Bank also has the priority to build the country’s capacity for irrigation agriculture, where it is working with the national body responsible for irrigation to revive some of the country’s defunct irrigation schemes, expand functioning schemes and construct new ones in various parts of the country. He reiterates that improving access to irrigated agriculture is an important initiative as far as building Tanzania’s ability to cope with the impacts of climate change and move the country’s farmers away from rain-fed agriculture.
How TADB operates
As Tanzania’s only national level DFI focused on the agriculture sector, TADB works across the vast country, covering all the 27 regions, with a specific focus on the agro sector. To ensure that it creates broad based impact, The Bank’s approach to financing the sector is value chain based, where it implements financing and other interventions along the entire agricultural value chain, covering activities from input production and supply to agricultural production itself, aggregation, agro-processing and trade, including export in the crop production, livestock keeping, forestry, fisheries, and aquaculture sub-sectors.
To deal effectively with its broad customer base, TADB ensures that it has an understanding of the great variability of needs and the wide range of players in the different agricultural sub-sectors, so as to offer tailor-made products to fit different requirements. “We maintain an open door policy, whereby a customer is encouraged to meet with our Business Development team, lay out the details of their project and its specific needs and it is only then that we head to the drawing Bank to design an appropriate package that would support the undertaking at hand.”
Ultimately, the specific individual or company will be supported with a package covering any of the following: financing for purchase of farming inputs; purchase of farm assets such as tractors, planters and combined harvesters; financing for construction or installation of irrigation infrastructure; or project finance if the need is to invest in agro-processing.
Similarly, TADB offers a guarantee product for small-scale farmers and agro-SMEs called the Smallholder Farmers Credit Guarantee Scheme (SCGS), which offers cash guarantee covers to commercial and community banks against loans extended to smallholder farmers and agro-SMEs. The SCGS was officially launched in 2018.
Five years of impact
The bank was formed solely for the purpose of financing the agricultural sector and is the only DFI of this nature in the East African region.
Justine opines that whereas other players including commercial banks focus on purely commercial motives, TADB’s mandate requires it to deliver against the country’s developmental objectives for the agricultural sector and is thus committed to facilitating the transformation of agriculture into a commercially oriented sector capable of delivering on the nation’s food security objectives, alongside contributing to industrial development, economic growth and the reduction of poverty.
“Given the multitude of matters and opportunities that lie in this large sector of the Tanzanian economy, we do recognize and value the contribution of other institutions – public, private, NGOS, and others – in championing the agricultural transformation agenda.” He adds that the Bank is strongly committed to working with such partners to create required synergies in delivering its mission.
As the Bank commemorates its fifth year in operations, Justine discloses that they have made tremendous strides in a number of key deliverables, including lending, impact on farmers, training and capacity building and its improving access to its services in the country.
In terms of lending, he reveals that TADB has issued direct loans of over TZS 183 billion (US$79 million) in the last 5 years that have financed over 150 projects, and in the process impacting over 1.7 million farmers in all regions of Tanzania. The Bank has also facilitated the issuing of over TZS 50 billion (about US$21.7 million) to over 700,000 smallholder farmers in 29 cooperatives and 19 SMEs through the guarantee product SCGS. “In just 2 years, we have managed to expand the reach of the SCGS scheme by enrolling 8 participating financial institutions including two giant lenders in the country – NMB Bank and CRDB Bank – who, together, control about half the market share of commercial lending in Tanzania.” He adds that through SCGS, the Bank, in partnership with the eight financial institutions, has provided loans worth a total of TZS 46.65 million (about US$20 million), impacting over 6,000 smallholder farmers directly.
To build capacity of its stakeholders, the Bank has trained over 20,000 farmers nationwide on topics including farming as a business, governance of farmers groups, financial management and good agricultural practices. “We have also launched a financial inclusion initiative called Mfumo Jumuishi – an initiative which promotes financial inclusion of otherwise marginalized groups including smallholder farmers. Through this initiative we have successfully registered and facilitated the opening of 600,000 bank accounts for cashew nut, coffee and cotton farmers in the country.”
He adds that over the last 5 years, TADB has also managed to expand its services country-wide with the introduction of its Clustering and Value Chain Financing approach, where it currently operates 4 zonal offices, with plans to expand to 6 zones in the country, bringing its services closer to its customers.
About the Managing Director – Japhet Justine
Japhet Justine has an extensive experience in leading, managing and transforming retail and banking businesses at leading national and international companies.
He has a Masters of Philosophy in Development Finance from the University of Stellenbosch Business School, Cape town – South Africa and a Bachelor of Commerce Degree in Accounting.
Before joining TADB as the Managing Director, he was the MD at Tanzania Women Bank, while he has also served regionally before as the Regional Head of Retail at BancABC in Zambia, where he successfully restructured and merged two banks – Finance Bank Zambia and BancABC – in 2016.
Through his prior experience he is fully committed to changing the dialogue towards enhancing client-investor engagements in financing strategic projects, as well as mobilizing investment in Tanzania that will generate social benefits using a Mobilize, Deploy and Recycle approach. He recognizes that at the heart of this dialogue lies operating models that integrate both commercial project finance and development finance elements, which he believes are necessary not only to galvanize transformation of traditional farming systems but to also boost sustainable economic development in the country.
Well rounded and grounded in banking the sector, keen about the vast opportunities in Tanzania’s agriculture potential and with a deep passion for development, Justine believes that being the leader at TADB gives him the opportunity to deliver in sectors he holds dearly to his heart – with a purpose that aims to alleviate poverty and improve the livelihoods of Tanzanians.
“Growing up in rural Tanzania, I have had the opportunity to experience both rural and urban environments. Through this, I am able to comprehend various mindsets, various challenges on the ground and fathom the opportunities present in Tanzania agriculture and beyond. Tanzania is a beautiful country that has everything from its fertile land for agriculture, industry, mining and you name it; yet so many opportunities remain untapped. This inspires me to continue the work to crowd-in investors and want to develop innovative tools and programs that will allow investors to tap into these opportunities and drive the economy of Tanzania,” he reveals.
A persistent and passionate dreamer with forward-looking instincts, Justine pushes his team to go beyond their limits to be innovative, to grow and collaborate in order to find solutions that will streamline internal processes and cultivate outcomes that will touch lives across the agricultural sectors in Tanzania.
He adds that he is highly invested in organizational transformation – especially through digitalization – of the agriculture sector and building on partnerships to leverage on each actor’s experience and harness the much needed synergies to transform Tanzania’s agriculture. He also believes that a collaborative approach with all potential partners being involved in the sector will result in impactful and long-lasting solutions to the agriculture space, not just in Tanzania but Africa at large. He adds that good governance, digitalization and agriculture are at the core of the development agenda in Africa, and draws his inspiration from Akinmwumi Adesina, the President of the Africa Development Bank (AfDB) – admiring the work he has done for the agriculture sector in Nigeria and Africa as a whole, especially through the work at AfDB.
“Now that is one person I would like to have breakfast with and exchange notes with and perhaps he can give me some tips on how I can be the first Tanzanian President of AfDB!” he reveals
Aligning strategy with the challenges
For a sector that has experienced limited support from financial service providers for decades, not just in Tanzania but in most African countries, Justine admits that it has indeed been a steep learning curve for the Bank for the last 5 years, but he believes they have made huge strides in bringing the right focus on the agriculture sector by the government and other stakeholders. “In some instances, you would have on one hand value chains with huge opportunities but on the other, great fragmentation and asymmetry between players; a situation which dampens the available opportunities, leading to lenders shying away. A prime example of this is the oil palm value chain, which has huge opportunities for growth,” he says.
“In response, our strategy has been to develop capacity for off-take of produce as an incentive to farmers to increase production. We believe that once we succeed in developing reliable off-takers, it would be easier to get a positive response from farmers in terms of increasing investments in their farm operations. This approach has proven highly successful.” He gives the example of the successful project in the Kagera region, where, starting in 2018 they facilitated off taking of all coffee from farmers by 3 previously defunct cooperative unions. “Farmers’ response has been highly positive, therefore, we are now rolling out a plan to expand production by facilitating expansion of the country’s capacity for coffee seedling production followed by a campaign for expansion of coffee production not only in Kagera but in other coffee growing regions of the country as well. To this end, we are currently exploring opportunities to create multi-stakeholder partnerships based on interventions that will develop sustainable agricultural value chains in the sector.”
He reveals that the same strategy has yielded great success in terms of financing agro-processing factories as primary off-takers of produce from small-scale farmers, adding that TADB boasts 24 new agro-processing factories that have been funded under this strategy. “Going forward, as we plan to increase our impact, we will be looking into rolling out more innovative approaches to financing the sector including employing models such as wholesale lending through partner banks and other institutions, project co-financing and related models. In terms of institutional capacity, we continue to strive to build a learning organization guided by evidence and best practices. We continually endeavor to build capabilities in all the important areas of our operations, ranging from financial capacity to human capital, processes and systems that will enable us to create sector-wide impact consistent with the bank’s mandate and stakeholders’ expectations.”
However, to deliver on its strategy has not had its setbacks. While the Bank has had great success, it has been faced with cases where they were forced to either restructure or write down some accounts where some farmer organizations fell short of their revenue expectations due to market downswings. “However, these lessons came early and we were able to salvage a good number of accounts by imposing robust monitoring measures in subsequent seasons. Our new strategy now starts with interventions on the market side and working backwards in multi-stakeholder partnerships to expand farmers’ capacity to produce and facilitate linkages with other actors (agro-input suppliers, technology suppliers etc.) that can create a value chain that reliably satisfies market demand.”
To adequately manage and deliver on its mandate, TADB recognizes and highly values the contribution of its people. It has therefore focused on creating multi-disciplinary teams of enthusiastic, skilled and committed professionals capable of delivering and sustaining economy-wide impact through targeted interventions in the agricultural and allied sectors. Justine reveals that attracting talent is a huge challenge for banks thus attraction, development and retention of the best talent is at the heart of the Bank’s human capital development programs. “To stay ahead, we offer attractive incentives and opportunities for career and personal development for all staff and strive to remain an employer of choice, where work is enjoyable and fun yet engaging and intellectually stimulating.”
A sustainable future in focus
According to Justine, although significant progress has been made as far as moving the agricultural agenda forward in Tanzania, some critical challenges still remain, the largest being the challenge of climate change and its adverse impact on agricultural production – especially as it disproportionately affects small-scale farmers.
“The shift in weather patterns means that there is a much greater risk in smallholder agricultural production now than ever and it is imperative that all actors – public and private – must now work together to implement strategies to build the resilience and adaptation capabilities of smallholder farmers against the adverse impacts of climate change.”
However, he divulges that the Government of Tanzania is implementing different measures at the national level to mitigate the impact of climate change in the country, including the enactment of the National Climate Change Strategy (2012), the Agriculture Climate Resilience Plan (2014–2019), and the National Climate-Smart Agriculture Programme (2015–2025), which signify the Government’s commitment to make Tanzania’s agriculture climate-smart by 2030.
The TADB has taken the lead to bring together actors in the agriculture value chain, including policy and decision makers, research institutions, civil society, farmers’ organisations, the private sector and others to mainstream climate smart agriculture in planning and executing agricultural development strategies. Further, it offers financial support for the implementation of these strategies