PRIVATE AGRICULTURAL SECTOR SUPPORT TRUST (PASS) Current Status of Agricultural Projects Financing in Tanzania- Challenges and Opportunities Livestock Expo & National Milk Week, Arusha - 1st June 2018

About PASS Established in 2000 as a project by Government of Tanzania under the Danish funded Agriculture Sector Programme Support (ASPS) 2002 Started its operation 2007: Registered as an autonomous legal Trust under the laws of Tanzania Not for profit- charitable institution Sector Specific: Agriculture, livestock, fisheries (forestry – e.g. bee keeping)

PASS Founders Committee Government of Denmark Tanzanian Private Commercial Farmer Government of Tanzania PASS Funders

PASS Outreach PASS Branch Network Arusha KIGOMA 6 zonal branches; Morogoro, Mbeya, Arusha, Mwanza, Mtwara and Kigoma

Reduced Poverty Levels (income and employment) PASS GOALS Outcome: Increased level of productive investments among agribusiness entrepreneur s Impact: Reduced Poverty Levels (income and employment) Goals: Small and medium Agribusiness entrepreneurs’ capacity to access financial products and services increases Financial Service Providers capacity to better serve agribusiness entrepreneurs increases Relationship between agribusiness and financial service providers strengthens PASS operates efficiently and sustainably

Targeted sector and Beneficiaries Who can apply for PASS Services? PRIVATE ENTREPRENEURS Individuals Associations, Companies, AMCOS, SACCOS linked to the agricultural sector. Agribusiness All agricultural value chain actors with viable investments and needs access to credit for capital Any individual credit needs will be guaranteed subject to acceptance of partner bank, or else will be facilitated through a wholesale lending – e.g. farmer groups. MFIs, Community Banks Access loan funds; Linkage banking guarantee between Tier 1 and Tier 2 banks for on lending to agricultural value chain

PASS Products and Services Business Development Services: Feasibility studies, Business Plans Preparation, Capacity Building to Farmers, Farmer development services-group formation, out-grower schemes & contract farming AIC services PASS Guarantee Products

PASS Blended Finance Model Re-guarantee Equity Risk sharing fees BANKs Commercial/ DFIs Credit Guarantees Equity Leasing Finance Company NON-BANK FINANCIAL INSTITUTIONS (e.g. Microfinance) Medium/Large Agribusiness private companies Quasi Equity/Mezzanine Finance Commercial debt instruments BDS Finance Lease FARMERS micro, small and medium enterprises (MSMEs) Sector: Agriculture, Livestock & Fisheries

FARMERS: micro, small and medium enterprises (MSMEs) Banks & Private Equity Investors Equity $ € £ ¥ EXIT Debt & Equity Mentorship & Coaching Agribusiness Incubator Quasi Equity BDS Business Growth FARMERS: micro, small and medium enterprises (MSMEs)

Our Achievements A total of 729,920 agricultural entrepreneurs benefited from PASS Guarantee between the years 2013 to 2017 with total loan amounts of TZS 404.1 billion (US$ 177 million). In 2017 alone, PASS Trust supported a total of 170,974 individuals of which 80,358 (47%) were women. The percentage of women has continued to increase compared from 45.3% in 2016 due to efforts made by PASS to make access to credit more inclusive. The guarantee cover of up to 80% for women owned agricultural business compared to 60% ceiling for other businesses

Called Up Guarantees Status as at 31st December 2017 Historical Trend of Claims Paid (TZS Billions) Year Guaranteed Loan Portfolio Guarantee Committed Guarantee Claims Paid % 2015 89.8 41.1 0.34 0.8% 2016 122.2 58.8 1.6 2.7% 2017 184.1 78.9 1.79 2.3% Reasons for Defaults Drought – e.g. barley farmers in west Kilimanjaro Floods – some rice farmers Disease – e.g. poultry farming in Maswa Government policy – e.g. maize export ban – farmer groups in Ruvuma region Character and business failure

Collaborating Banks PASS has already signed Credit Guarantee Agreements with:

Other partners

Tanzanian Banks: Lending to Agriculture vs Other Economic Sectors Banking Industry (All Figures in TZS Millions)   2009 2010 2011 2012 2013 2014 2015 2016 Total Banking Industry Loans (All Sectors) 4,534,091 5,485,269 7,156,999 8,464,923 9,914,044 11,914,931 14,865,800 15,432,176 Total Banking Industry Loans (Agriculture) 468,825 711,439 979,793 940,453 976,533 1,069,961 1,196,697 1,120,376 % of Banking Industry Lending to Agricuture 10.34% 12.97% 13.69% 11.11% 9.85% 8.98% 8.05% 7.26% % Growth of Banking Industry Lending to Agriculture 51.75% 37.72% -4.02% 3.84% 9.57% 11.84% -6.38% Source: Bank of Tanzania; Directorate of Banking Supervision Annual Report, 2009-2016

Tanzanian Banks: Lending to Agriculture vs Other Economic Sectors Source: Bank of Tanzania; Directorate of Banking Supervision Annual Report, 2009-2016

Tanzanian Banks: Lending to Agriculture vs Other Economic Sectors Source: Bank of Tanzania; Directorate of Banking Supervision Annual Report, 2009-2016

PASS Impacts on Agriculture sector Financing in Tanzania Total Agriculture related projects banks financing in 2016 was TZS 1,120 billion % PASS Guaranteed Agriculture Loans in Various banks in 2016 was TZS 122 billion, equivalent to 11% in the industry. Source: Bank of Tanzania; Directorate of Banking Supervision Annual Report, 2009-2016; and PASS Analysis

Trend of Agriculture Sector Financing Under PASS Support

Our Story of Farmers Transformation from Poverty The Story of Ms Napir Mukare of Monduli, Arusha on her cattle fattening business Napir’s house BEFORE PASS support Napir’s house AFTER PASS support

Our Story of Farmers Transformation from Poverty

Agriculture Financing Challenges Banks delay loan disbursement Lack of collateral for farmers as per Banks requirement. High Interest Rates Climate change – drought, excessive rains Diseases (livestock), pests Policy constraints: export bans, permits, levies, taxes Knowledge gap to structure agricultural credit for some banking professionals banking regulations in loan provisioning

Opportunities Irrigation financing – higher appetite from lenders Enhancing lease financing for agricultural mechanization Value chain financing – with offtake contracts and extension services…e.g. crops (maize), livestock (cattle fattening, dairy farming, poultry farming) Policy reforms opportunities: approval of blue print, more incentive given to some agricultural sub-sectors, etc

Discussion Questions and Answers End “Improving quality of life through agribusiness transformation” www.pass.or.tz Discussion Questions and Answers