A LEADING farmers’ union said this week the Zimbabwe Mercantile Exchange (ZMX), which went live recently, will give banks confidence to inject loans into the agricultural sector, with financially excluded rural farmers among the biggest beneficiaries.
Zimbabwe Farmers Union (ZFU) executive director Paul Zakariya told businessdigest that commodity exchanges were efficient in ushering transparent price discovery, thereby turning chaotic markets and seamless trading machines with multiple positive spinoffs.
“The agricultural sector will immensely benefit from transparent price discovery as well as organised produce marketing. Rural financing will be made possible as farmers, through warehouse receipting, will be able to access loans and other financial products from financial institutions,” the ZFU boss added.
ZMX was launched under a partnership between government and the private sector two weeks ago, nine months after Treasury in November last year budgeted the equivalence of US$500000 to kick start the platform.
Private sector participants in the exchange include the Financial Securities Exchange, a licensed securities exchange, TSL Limited, a publicly traded agro-industrial business and CBZ Holdings, Zimbabwe’s biggest banking group.
Zimbabwe’s strategy is to encourage the formalisation of small-scale farmers to ensure the sustainability of their operations through increased access to credit facilities, with produce acting as collateral.
ZMX shall be based on a Warehouse Receipt System, which is key in helping Zimbabwe rampup production in a sector that contributes 17% to the country’s gross domestic product.
Official statistics indicate that agriculture provides employment and income to more than 65% of the country’s population.
Economist Takudzwa Chisango said the greatest benefit of ZMX will be the tradability of warehouse receipts for agricultural financing.
“Through this, a farmer can use a warehouse receipt to secure finance from finance institutions. Malawi provides a perfect example of how useful commodities exchanges are in agriculture financing,” Chisango said.
Leading economist, Victor Bhoroma said ZMX will help link buyers, sellers and financiers.
“Some of the challenges that millions of Zimbabwean farmers currently face are to do with price controls and late payments, which has been taking place under high inflation Similarly, access to market, the independent buyers, and capital are constraints for farmers especially those who produce wheat and soya beans, which are capital,” Bhoroma said.