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MAL establishes historic 3 million loan facility for farmers at DBSI
For the first time the government through the Ministry of Agriculture and Livestock (MAL) injected a historic 3 million loan facility for farmers through the Development Bank of Solomon Islands (DBSI) so that farmers throughout the country (Solomon Islands) can have access to credit facilities.
Permanent Secretary of MAL, Ethel Tebengi Frances, Permanent Secretary of the Ministry of Finance and Treasury (MoFT), McKinnie Dentana and DBSI Interim Chief Executive Officer Tukana Bovoro signed the Grant Agreement on 28th June 2021 at the MAL Headquarter Office in Honiara.
Under the “Agriculture Development Grant Agreement”, MAL will deposit the 3 million grant to DBSI to put it for an agriculture loan, which the farmers can apply for to increase or boost their production. MAL/SIG is the funding agency while DBSI is the executing/implementing party.
The agriculture loan facility at the DBSI is specifically tailored to address specific needs of the agriculture sector and that will enable access to credit facilities not only for farmers but those who process and exports agricultural products.
Permanent Secretary of MAL, Ethel Frances said,”Our people, let alone farmers, cannot access loans due to their inability to satisfy bank requirements. As most of our people are in the agriculture sector, I know it will benefit a good majority of them.
Mrs. Frances went on to emphasise that “not everyone will want to come and apply for projects in the government and so this loan facility is for them. It is for those who want to take pride in doing it on their own than relying on projects.”
“I believe personally that one of the biggest problem we have in this country is ‘project based’ development. While this is good for service delivery it is not good in many ways for income generating investments. You will anecdotally prove it from the high rate of project failures. The success rate of projects is very low because of the lack of accountabilities and seriousness project beneficiaries placed on projects given to them. What we should do is enable access to credit facilities for our people and have credit products that is tailored for their needs and operating environment,” Mrs. Frances said.
“As it is a loan facility, the process of selection will be done by the DBSI alone and MAL will hold them accountable for the success and/or failure of this program. As per agreed, DBSI will report half yearly to MAL and an annual audit will be carried out by the Office of the Auditor General (OAG) to ascertain its successes. MAL intend to increase this support provided it satisfy its objectives.”
The Permanent Secretary of MAL continue to explain that “as this is a loan facility DBSI bank will assess the ability of borrowers to repay so the first eligibility is that this is for those who are already in operation and wish to increase their farming or processing businesses. Those starting or in initial years of operation can still access support from MAL. This criteria may change as we progress and have lessons to learn from.”
Permanent Secretary of the Ministry of Finance and Treasury (MoFT) McKinnie Dentana said the arrangement is a fine example of achievement of the intention of the government policy in setting up of DBSI.
“There are some programs that the government would like to support under the DBSI Act and agriculture is one of the priority program. This arrangement through DBSI is one we really looked at during the setting up of the Bank. The DBSI is where we can channel such funding through and it can then support the farmers,” PS Dentana explained.
He further said one of the reasons for supporting DBSI too is government wants to bring most of our farmers or Solomon Islanders from the informal sector to the formal activities sector. Our Solomon Islanders normally cannot receive support from commercial banks and one way of enabling this possibility is to develop this bridge to move them from the informal to the formal.
“So definitely from this arrangement our farmers will work closely with DBSI, who will train them in all aspect of financial services and bring them forward from that status up to a status where they can, not only access DBSI but also funds from other commercial banks. This is an ambition, and that is that we would like to see our Solomon Islanders progress from their informal settings to a more formal one where they can access fund.”
Mr. Dentana said assessment of applicants will be made on the Bank’s requirements therefore banking requirements will be dependent on the bank (DBSI).
Meanwhile, DBSI Interim Chief Executive Officer Tukana Bovoro said on behalf of the bank management and staff they are very happy to be part of this government redirection policy and to be able to support MAL in its aim and ambitions because its purposes are also align with what the bank is doing.
“Our role is to put money out in to the rural areas and to our agricultural people in a sustainable manner. We are not only going to be giving money but we are hoping to be giving money in a way that also brings in certain disciplines.”
However, interim CEO Bovoro said, “because our funds are limited, we want to target what we call the low hanging fruits, the ones that already in business by utilising the funds to support them become even better and become more stable and sustainable so that they can continue to work in the future.
“The bank is starting to achieve the purposes that it was set up for and this arrangement, is another step in a long journey,” he said.
Under the Grant Agreement the bank will also conduct financial literacy training for farmers so they learn simple financial management technique that will allow them to repay their loan and still enjoy a good return