GUIDELINES FOR AGRICULTURAL PROJECTS FINANCING WINDOW

1. PRODUCT

The product entails financing production, processing and marketing (for borrowers who involves in production and/or processing) of all agriculture and agriculture-related projects for short, medium and long terms, utilizing a special Window funded initially by the Government. Agriculture in this framework is broadly defined to include crops and livestock.

2. TARGET MARKET

The target market for this credit program window will include all agricultural and livestock projects with established good track records and competent management teams. The focus for this facility will mainly be on producer communities organized as cooperatives, as well as corporate entities and microfinance institutions involved in agriculture. Start-ups that meet critical eligibility criteria shall also be considered. Specifically, the target market for this credit program window shall comprise of:

•  Small and medium size farms organized as cooperatives or out-growers of larger farms.
• Medium and large scale commercial farms, plantations and ranches. Categorization of small, medium and large scale will be as provided in the Government’s SME Policy.
• Downstream lenders to the agricultural sector, e.g. community banks and micro-finance institutions (NGOs, SACCOS). iv) Intermediate agricultural activities in the value chain, e.g. storage, processing and marketing.

3. PRICING

3.1 Lending rate

Under this Window interest rate will be charged at maximum 5% per annum. The 5% shall be the Government rate. Funds will be disbursed to on-lenders (wholesale) and retail basis. Pricing for wholesale will be at 4% (5% - 1%) per annum, while retail price will be 5% p.a. In respect to wholesale borrowers (on-lenders), the price to be charged to final consumer/borrower/farmer shall not exceed 8% per annum. These rates are subject to periodic reviews.

3.2 Bank charges

All expenses in connection with the arrangement of the facility, including costs of stamp duty and registration of the security documents, legal and other expenses shall be for the account of the Borrower. For the case of on-lenders, all other credit charges/fees to be charged to final borrower/farmer in connection to this agricultural credit shall not exceed 2% per annum.

4. LENDING TENURE

4.1 Repayment period

The repayment period for credit facilities under this program shall range between six months and 15 years depending on the nature of the agricultural activity being financed and related financial projections and also seasonality of the crop under production.

4.2 Grace period

Grace period would be granted based on the maturity period of the crop and projected cash flow. The maximum grace period shall be 3 years for perennial crops and 1 year for annual crops. The borrower shall be liable to pay interest during grace period, though the payment will be structured to be in line with seasonality of earnings. 5. SPECIFIC

TERMS AND CONDITIONS APPLICABLE TO ON –LENDERS AND DIRECT BORROWERS

5.1 On – lenders

• The borrower must have acceptable legal status e.g. Co-operatives SACCOS, Micro-finance institutions and Associations.
• The borrower should have good track record.
• Securities under this category should comprise of lien on receivables (outstanding portfolio), fixed deposits and legal mortgage where applicable
• SACCOS, Associations and Co-operatives should own certificates of maximum liability from the Registrar of Co-operatives.
• Securities pledged by MFIs’ borrowers shall be assigned to TIB (deed of assignment). 
• Interest rate shall be charged at 4% per annum and for the final borrower/farmer the rate shall not exceed 8%. 
• The loan tenure will be a minimum of 6 months and a maximum of 15 years. 
• The loan amount shall be a minimum of TZS 50 million and a maximum of TZS 1,000 million.

5.2 Direct borrowers (commercial farmers) 

The borrower must be a limited liability company.

• The borrower should have good track record, but start ups that meet other critical eligibility criteria shall be considered.
• Securities under this category should comprise of fixed deposits, debenture, stocks in warehouses, legal mortgage and chattels mortgage. iv. Projects with proper arrangements for irrigation will have an added advantage.
• Corporate farmers supporting out-growers will have an added advantage. vi. Interest rate shall be charged at 5% per annum. vii. The loan tenure shall be a minimum of 6 months and a maximum of 15 years.

6. SECURITY STRUCTURE

The following security structure shall be adopted:

• Advances under this credit Window shall be secured by debenture and mortgage over landed property, as well as pledges of agricultural machinery, equipment and implements, produce held in warehouses, processing equipment and machinery, motor vehicles and credit portfolios of on-lending institutions.
•  Where the project land is not legally owned by the project or its promoters, alternative landed property may be taken as the primary security, provided that the alternative land is legally owned by the project or its promoters. Third party security shall not be accepted as the primary security.
• In addition, the assets financed under the Window shall count towards security cover after discounting by 20%.
• Whenever feasible, sound insurance cover shall be taken against loss by fire, flooding, etc; the cost of which shall be borne by the borrower. However, the present insurance schemes cover produce in warehouses and other storage facilities, as well as assets other than crops in the field.
• In case of financing of goods in warehouses, there will be strict control by a reputable collateral manager, under a formal Collateral Management Agreement, who will ensure that TIB’s interests are protected. The borrower shall bear the cost of collateral management.
• In all, the security cover requirement will be a minimum of 1.25 times (regulatory requirement) as opposed to the standard TIB requirement of at least 1.50 times. The legal documentation cost is to be borne by the borrower.

7. CREDIT LIMIT, CREDIT CONCENTRATION AND RISK ACCEPTANCE CRITERIA

7.1 Credit Limit

7.2 Credit Concentration

 7.3 Risk Acceptance Criteria

 8.0 EXCLUSIONS

Because of the size of the fund initially, the following shall not be done:

•  Refinancing of other/commercial loans;
• Financing of suppliers or manufacturers of machinery and equipment.