The Tobacco Industry and Marketing Board (TIMB) and Zimbabwean banks are jointly working on a scheme to provide funding to farmers, reports The Sunday Mail, citing a senior official.
As part of its Tobacco Value Chain Transformation Plan, which seeks to retain more value from the industry in Zimbabwe, the government seeks to increase local funding for production of the crop.
Currently, about 90 percent of tobacco production is financed through offshore loans under contract schemes.
The offshore pre-financing arrangement means tobacco merchants bring into the country part of export proceeds in the form of inputs. After exports, the bulk of the proceeds are used to pay offshore loans. Critics have suggested the cost of inputs have been highly inflated in some cases.
Smallholder growers struggle to access finance because they lack security. The proposed model seeks to enable growers to access the loans even without collateral, TIMB acting chief executive Emmanuel Matsvaire said in an interview Aug. 31.
Last month, the Reserve Bank of Zimbabwe scrapped the requirement compelling merchants to source offshore financing to fund production and buying green leaf from farmers.