Tanzania has secured more than 300 million US dollars in private sector financing for agriculture through a credit guarantee scheme, expanding access to loans for smallholder farmers and agribusinesses. The Smallholder Credit Guarantee Scheme (SCGS), managed by the Tanzania Agricultural Development Bank (TADB), has channelled the financing through 22 partner financial institutions, according to TADB Managing Director Frank Nyabundege. Over its eight-year history, the scheme has enabled lending to more than 680,000 smallholder farmers, women and young people.
The scheme addresses a critical challenge in agricultural lending by providing credit guarantees that help borrowers meet collateral requirements that would otherwise prevent them from accessing finance. Agriculture has long been perceived as a high-risk sector by lenders, largely because of inadequate understanding of its unique financing needs, including seasonal production cycles and the complexities of agricultural value chains. By reducing perceived lending risks, the SCGS has attracted private capital into a sector that commercial banks have traditionally viewed with caution.
The TADB, which has core capital of about 50 million US dollars, has developed an Integrated Value Chain Financing (IVCF) Model to support this work. The model finances activities across entire agricultural chains, from production and aggregation through to value addition and export markets. This approach enables financial institutions to better understand agricultural businesses, manage risks and structure loans in ways that support sustainable production and repayment.
Supporting this financing framework, the Bank of Tanzania (BoT) Academy's Agriculture Financing curriculum provides technical assistance and training to partner financial institutions to improve their agricultural lending practices. The bank also delivers training on climate financing frameworks and technical support to farmers and small and medium-sized enterprises operating in the agricultural sector. Co-financing arrangements, through which TADB collaborates with other financial institutions to finance agricultural projects, provide another mechanism for attracting commercial lenders and expanding access to capital.
Nyabundege emphasised that blended and inclusive financing approaches would be essential in mobilising the resources needed to strengthen climate-resilient agriculture and support Tanzania's long-term development goals. For Tanzanian farmers and agribusinesses, the scheme has reduced barriers to borrowing by providing guarantees that lower the collateral requirements lenders typically demand.