African Development Bank Supports Smallholder Farmers in Tanzania with $2M Credit Guarantee

In a significant move to boost agricultural productivity and food security in Tanzania, the African Development Bank (AfDB) has approved a USD 2 million partial credit guarantee and a USD 528,600 grant. The funding aims to facilitate access to fertilizer for smallholder farmers through the Africa Fertilizer Financing Mechanism (AFFM) and the African Fertilizer and Agribusiness Partnership (AFAP).

The project, named AFFM Partial Credit Guarantee Provisioning Project, will assist suppliers and importers in purchasing fertilizer for Tanzanian hub agro-dealers. The credit guarantee, managed by AFFM, is expected to be utilized 15 times, enabling the distribution of at least 60,000 tonnes of fertilizer valued at $36.5 million.

The grant, covering 94% of the project’s recurrent costs, will ensure the smooth implementation of the initiative. AFAP will contribute the remaining 6% of the costs. By providing timely access to and appropriate fertilizer use, the project aims to enhance productivity and improve access to finance for large fertilizer distributors.

The implementation of the project will commence on July 1, 2023, and continue until July 31, 2026. It consists of three main components: support for hub agro-dealers to access the credit guarantee facility, increasing fertilizer availability, and project management and coordination.

To expand the project’s impact, AFAP plans to extend its activities to five additional regions in Tanzania: Ruvuma, Manyara, Rukwa, Kagera, and Mwanza. The ultimate beneficiaries are expected to include 550,000 smallholder farmers, with direct and indirect beneficiaries comprising five suppliers, 35 hub agro-dealers, and 1,000 retailers.

Tanzania’s agricultural sector accounts for 29% of the country’s GDP and employs 65% of the population, with most of the agricultural labor force being female. Despite the increasing trend in fertilizer consumption, which rose from 15.858 kg per hectare in 2018 to 19 kg per hectare in 2023, it remains well below the continental target of 50 kg per hectare.

Financial support is crucial in addressing the existing gap in agriculture financing in Tanzania. Currently, only 3% of commercial bank lending is dedicated to agriculture. The project aims to bridge this gap and support Tanzania in meeting the Abuja Declaration target of 50 kg per hectare of nutrient consumption.

By building on the successes of the Bank’s previous Tanzania Agricultural Inputs Support Project, which facilitated the financing of additional volumes of fertilizer worth USD 30 million, this new initiative is set to make a substantial impact on Tanzania’s agriculture sector. With the African Development Bank’s support, smallholder farmers in Tanzania can look forward to improved access to fertilizers, increased productivity, and a brighter future for the country’s agricultural landscape.

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