An Action Plan for Developing Agricultural Input Markets in Tanzania

importer. There is a 1% commitment fee for credit lines
extended. For opening an L/C for imports, an IDF form
is a must and has to be completed by the importer.
The Savings and Credit Cooperatives (SACCOs)—
with 800 members—provide input supplies on credit
to its members with an agreement with the sugar mills
to pay at harvest time. Interest rates are low at 12%.
SMEs in agriculture get loans from the CRDB by
going through Private Agriculture Sector Support
(PASS—a limited company by guarantee financed by
the Tanzanian and Danish governments). PASS helps
prepare business plans (1.5% fee) and provides a 30%-
40% guarantee to the bank on behalf of the SME. Of
the interest rate of 18%, CRDB gets 12% and 6% goes
to PASS. (For comparison, fixed deposit rates are 2%-
3%, treasury bill rates in Tanzania are 5.7%, and interest
rates generally charged are 18% since default is
high.)
Regional banks like the Kilimanjaro Cooperative
Bank in Moshi also extend production credit to the
farmers through cooperatives with inputs supplied by
local stockists. The farmers are not given cash. The
bank selects known stockists and provides them funds
to import/purchase inputs. The inputs are given by the
stockists to bank-selected cooperative societies who in
turn provide the input to the farmers. The preferential
interest rates are 12% and collateral is either land or
hypothecation of stocks. This activity has been funded
by the International Monetary Fund (IMF) and EEC in
the past.
National Micro Finance Bank provides micro-finance
loans in the regions to small businesses, but not
in agriculture, livestock, and transport sectors since
these sectors are considered high risk and not fully covered
by insurance. The lending starts at 50,000 Tsh
($50) in the first stage and goes though six stages at
which the SME could be given a credit limit of 3.5
million Tsh ($3,500). All SMEs (ongoing businesses
only) start at Stage 1 and move upwards based on performance
record and credit history. Interest rate charged
is 2.5%/month simple interest. If payments are regular,
then only 2%/month interest is charged at the end of
the term. Collateral in the form of houses, household
equipment, motor vehicles, etc., are accepted at 150%
of the loan value. Majembe Auction Mart is utilized to
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collect bad debts for 10% in fees of the amount collected.
Bad debts run about 1.5%-2.0% though these
were also at one time about 4%.
Dealer (Retailer) Network
There is a sizeable network of agri-input dealers in
Tanzania in the provinces. However this network is all
in the cities and small towns and there are not many
dealers in the rural areas. There were several retailers
in every town visited: Morogoro (14 dealers), Arusha-
Moshi (5 dealers), Mbeya, Iringa, and others. There
were also branches of the importers that were mainly
in the wholesale business.
Many of the dealers stocked fertilizers, agrochemicals,
seeds (cereals as well as vegetables and flowers),
and veterinary medicines. In addition, some had sprayers,
pumps, sprinklers, and farm tools. Quite a few of
the dealers claimed that they had been trained by TPRI
but mainly in the proper and safe use of CPPs. They
were not so knowledgeable about fertilizers or seed.
Most of the retailers did business with their own or
informally borrowed capital. They felt that the institutional
credit process is tedious and the interest rates
are high. They all purchased from suppliers like Premium,
STACO, TFC, Twiga, Balton, East Africa Seed,
SATEC, Multi-flower, and Abkomi. They reported that
some of the farmers were very knowledgeable, but most
did not know much about the use of modern agri-inputs.
A few of the retailers who had been dealing for
many years with Premium and TFC were given material
on short-term credit (15 days). Almost all other
suppliers did not extend any credit.
Market Prices
The pricing is reasonably competitive with no indication
of any collusion. Prices are distance related
from Dar es Salaam reflecting the freight by rail or
road. Fertilizers (different from other commodities) are
moved mainly by road since the bulk of the requirements
are in the southern regions of Iringa, Mbeya,
Ruvuma, and Rukva where the roads are good. Supplies
to the northeastern regions are by rail since the
roads are not in good conditions. For example, urea,
based on the present international market, would cost
about Tanzanian Shillings 11,000/50-kg bag landed at
Dar es Salaam. Including port handling charges and
margins, it is sold ex-Dar es Salaam at 13,000 Tsh/bag
and is available in most of the regions at between 14,000