Until 1990/91 there had been much dependence on
donations and grants from external donors as far as acquisition of inputs
was concerned. Also banks such as CRDB
played a major role in sustaining agricultural production by providing
credit through Cooperatives.
These banks received money through special agricultural production and crop
purchase funds from the Bank of Tanzania for lending to unions for
procurement of inputs.
However, this financing arrangement face dome
problems but more important was poor loan repayment by Cooperatives. The
CRDB for example between 1985/86 and 1989/90 recorded an average recovery of
Despite the fact that the Cooperative Unions
were not repaying the loans, the banks had to repay back the loans to
BOT regardless of whether the loan was
recovered or not. This was a loss to the banks and the banks had to reduce
the loans to the unions, which reduced the supply of inputs to the farmers.
Furthermore, in 1991 the banking and
financing institutions Acts called for prudential lending involving hard
securities and credit worthiness of the borrowers. This condition could not
be met by most of Cooperative Unions,
hence shortages of inputs were continuously worsening and worse still the
private sector could not fill the gap as most of the private importers and
distributors of inputs were facing liquidity problem.
This widening inputs supply gap called for the
Government intervention. The Government had to look for an alternative way
of financing in order to ensure sustainable
supplies of inputs to the farmers and therefore AGITF was established in 1994.
Since then AGITF has undergone
transformation and streamline its activities of providing soft loans to
sockists, farmers and other beneficiaries in its efforts to enhance recovery
of issued loans so that the Fund revolves and sustain itself. In the end
more beneficiaries will be able to access the facility.
One of the major national strategic moves
towards poverty reduction was to privatise the productive sector for the
intension of improving production efficiency. However, together with the
good intension of improving the efficiency of the productive sector,
privatizations had shown some negative effects especially on supplies of
inputs as most of the necessary production inputs and other supplies are
increasingly becoming inadequately available. The fact that the farmers are
not credit worthy, challenges the privatization move as under any commercial
of farming/enterprises will always dictate the welfare of any money lending
business. Therefore the AGITF management had to take this as an important
caution to its prosperity.