Tanzania’s Mango Growers: A Sweet Future Through Enhanced Access to Finance

In a bid to propel Tanzania’s mango industry to new heights, Andrew E. Temu, a distinguished Agricultural Economist and Managing Director of Diligent Consulting Ltd., with a wealth of experience in agricultural finance, recently shared his expertise at a webinar organized by Agribusiness East Africa. The event, held in partnership with AMAGRO Tanzania (The Association of Mango Growers Tanzania), COPRA, TOSCI, SAGCOT, TAHA, and Nature Ripe, sought to address the critical challenges and opportunities related to financing in the mango sector. This article delves into the key takeaways from Prof Temu’s presentation and explores how improved access to finance can unlock the full potential of Tanzania’s mango industry.  

Prof Temu underscored the immense potential of Tanzania’s mango industry, highlighting its position as a major player with an annual production of 712,000 metric tons. However, he acknowledged the significant hurdles that hinder the sector’s growth, including limited infrastructure, market access constraints, and stringent quality requirements that impede exports. But beyond these, Temu emphasized the crucial role of finance and the need for tailored financial solutions to propel the industry forward.  

A key focus of Prof Temu’s presentation was the analysis of the formal commercial financial market in Tanzania. He revealed that despite its economic significance, agriculture receives a disproportionately low share of total credit at just 8.5%. However, he also pointed to the robust growth potential, evidenced by a substantial annual credit growth rate of 38.9% for agriculture. Temu advocated for increased lending to primary production, particularly focusing on inputs and trade to fuel further growth.  

But what are the specific barriers that mango growers face in accessing finance? Temu outlined several key challenges:

• High Perceived Risks: Banks often view lending to agriculture as high-risk due to factors like climate variability and market fluctuations.  
• Lack of Adequate Collateral: Many farmers lack the immovable assets typically required as collateral for loans.  
• High Cost of Funds: High-interest rates can make borrowing expensive and unsustainable for mango growers.  
• Financial Literacy and Business Practices: A lack of financial literacy, the prevalence of informal businesses, and poor financial record-keeping are major impediments to accessing finance.  

To overcome these challenges, Temu discussed a range of innovative financial mechanisms:

• Loan Guarantees: Institutions like TADB, in collaboration with AfDB, provide loan guarantees that reduce risk for lenders and improve farmers’ access to credit.  
• Letters of Credit (LCs): These are crucial for international trade, ensuring secure payments for exported mangoes.  
• Contract Farming: Entering into contracts with guaranteed buy-back agreements can provide farmers with the assurance of a market and improve their access to finance.  
• Warehouse Receipt Systems: These allow farmers to use stored produce as collateral, addressing the challenge of lacking traditional immovable assets.  
• Weather-Indexed Insurance: This innovative product can mitigate the risks associated with climate variability, making lending to mango growers less risky for financial institutions.

Prof Temu also emphasized the importance of a value chain finance approach. This approach provides a holistic view of the mango industry, allowing for targeted financing at each stage—from inputs and production to processing and export. It benefits both farmers and financiers by providing a clearer understanding of the risks and opportunities at each link in the value chain.  

Beyond traditional banks, Prof Temu highlighted the crucial role of non-bank financial institutions (NBFIs) in supporting mango growers. He specifically mentioned institutions like PASS, Aceli Africa, and TADB, detailing the services they offer:  

• PASS (Private Agricultural Sector Support): Provides loan guarantees, assists in preparing bankable business plans, and offers crucial linkage services.  
• Aceli Africa: Focuses on increasing access to finance for agribusinesses in sub-Saharan Africa, providing advisory services and connecting farmers to financial institutions.  
• TADB (Tanzania Agricultural Development Bank): A state-owned development finance institution specifically designed to catalyze access to finance for smallholder farmers and SMEs in the agriculture sector.

Prof Temu also discussed the growing trend of alternative lending in Tanzania, which is projected to reach USD 941.7 million by 2028. He encouraged mango growers to explore these emerging options, including peer-to-peer lending and digital lending apps, which offer more accessible financing without the stringent requirements of traditional banking.  

In his concluding remarks, Prof Temu called on mango growers to take proactive steps to improve their access to finance:

• Enhance Financial Literacy: Attend workshops and training programs to gain a better understanding of financial products and services.  
• Formalize Business Operations: Register businesses as companies or cooperatives to increase eligibility for credit and other financial products.  
• Demonstrate Market Demand: Secure contracts with buyers or demonstrate a strong local market to prove the viability of mango businesses.  
• Embrace Collaboration: Join cooperatives or farmer groups to leverage collective bargaining power and share collateral.  
• Maintain Good Record-Keeping: Implement proper financial record-keeping practices to demonstrate financial responsibility.  

By taking these steps and embracing the innovative financial solutions available, Tanzania’s mango growers can overcome the barriers to finance and unlock the full potential of this promising industry. With the right financial tools and collaborative efforts, Tanzania is well-positioned to lead a ‘mango revolution,’ boosting its economy and securing its place as a global leader in mango production.