United States Agency for International Development (USAID), has signed a 10-year agreement with Absa Bank Mozambique to increase financing for small- and medium-sized agribusinesses a development which will see agriculture industry grow in Mozambique.
The agricultural sector contribute 30% of Mozambique’s gross domestic product (GDP) and accounts for 80% of the labor force both unskilled and skilled.
The current challenges faced by many agribusinesses is that they cannot secure traditional loans and financial services due to lack of borrower collateral and high lender risk associated with agriculture.
The involvement of USAID support will promote lending to new borrowers who may otherwise not have access to loans.
At the signing event, USAID Mission Director Helen Pataki said, new opportunities have been created
“The new financial services established here will create new opportunities for the development of a robust commercial agricultural sector that contributes to the reduction of poverty and chronic malnutrition in rural Mozambique.” He said
This USAID partnership will leverage US$16.5 million in lending by mitigating Absa’s risk over the next ten years and expanding the agriculture portfolio.
This is in addition to the nearly US$16.5 million the U.S. Government invests annually in agricultural programming focused on increasing incomes and job creation, supporting private sector growth, strengthening food security, enhancing productivity, improving market systems, and safety of food supply across the agriculture value chains.
Promoting inclusive growth in the agricultural sector is a critical component of the broader U.S. Government assistance in Mozambique.
In close collaboration with the Government of the Republic of Mozambique, the U.S. Government provides more than US$500 million in annual assistance to support the overall development of the nation.
The South African country has also recently received support from the IFAD to build the aquaculture sector and support more than 88,000 rural small-scale fish farmers.
Through the PRODAPE project worth US$49m, the country targets to support the transition of the aquaculture sector from subsistence to commercial production, underpinned by the involvement of small-scale farmers, particularly women and unemployed young people ready to embrace aquapreneurship.
Through this, the initiative will play a crucial role in the socio-economic development of the country and improve nutrition, food security, and increase production and incomes.
The availability of capital to the agricultural sector, through the partnership with Absa will support innovations that improve agricultural productivity, enhance food security, and increase job creation in rural areas of Mozambique.
The development agency will help 75-100 Mozambican agricultural enterprises, such as farmer groups, associations or cooperatives, producers, processors, wholesalers, retailers loan amounts will vary based on the need of the borrower, the average is expected to be approximately US$220,000.
Mozambique is the second-largest, formal exporter of food in the southern Africa region and could progress toward a trade surplus if regulation and agricultural practices improve. Its strategic location and trade corridors make the country a key player in regional and global food security.