East Africa Exchange to Lend Over $70M to Grain Farmers

The East Africa Exchange (EAX) will advance more than $70 million in loans to grain farmers who have faced challenges in obtaining credit. The regional commodities exchange is a subsidiary of Africa Exchange Holdings Ltd. (AFEX), which includes Heirs Holdings, Berggruen Holdings, 50 Ventures, and Ngali Holdings – a local Rwandan investment company.

This year the exchange launched an agricultural commodity financing scheme in Rwanda, which is based on a collateral management system through which financial institutions that lend to grain farmers on favorable terms, including the action of accepting a farmer’s grain as the only collateral on loans, are given full protection. This coverage has prompted financial institutions that previously would not have extended credit, to begin offering financing to the 144 EAX-registered farmer groups. Banks including Urwego Opportunity Bank, Bank Populaire du Rwanda, Guaranty Trust Rwanda, Equity Bank, Ecobank, KCB Rwanda, Atlantic Bank, and AB Bank have made agreements with the EAX to lend to grain farmers and dealers, representing what could amount to $72 million in funding.

The United Nations Development Program and the International Finance Corporation (IFC) both state that a liberalization of private sector funding in Rwanda will contribute to growth in the industry, if given favorable weather, and both the International Monetary Fund (IMF) and the Rwandan government have lifted their forecasts for growth for the country from 6.5% to 7%.

However, although institutional lenders have opened to the practice of lending to farmers and grain dealers, lenders are still reticent to lend along the entire supply chain, which is key to increasing production. Moreover, the IMF cautions that risks within the industry are higher, considering lower global commodity prices and Rwanda’s weaker outlook for its export markets.