No more worries for access to agric finance

Are you intending to venture into agriculture sector and lack necessary funds to materialize your plans? Don’t worry. Investment facility is waiting for you to make your dreams a reality.

Maize plantation under irrigation scheme in Nyagatare: RIF provides financing support for different agric activities including irrigation facilities

Maize plantation under irrigation scheme in Nyagatare: RIF provides financing support for different agric activities including irrigation facilities

It’s true that access to agriculture finance has been a great challenge for many Rwandan farmers; given that most of these farmers can’t raise enough funds in their families to finance their farming activities. Yet the sector remains the sole source of earning life and increase income for majority Rwandans, not to mention that it’s the backbone of the country’s economy.

It’s obvious that farmers with less access to credit plant fewer high yielding crop varieties. In many developing countries including Rwanda, and particularly in rural areas, access to financial services, including credit and formal saving mechanisms, is limited — another factor that leaves farmers with no means to finance their activities.

Then, you can wonder what would be the future an agrarian country within such a situation in case there would not be a mechanism to overcome these challenges. This pushed me to talk to officials in charge to know specific facilities in place that can help Rwandan farmers to overcome such challenges. According to the officials, one of the facilities includes Rural Investment Facility (RIF 2).

RIF 2 is the Second Rural Investment Facility. It is a grant program worth 10 million USD that is under the Ministry of Agriculture and Animal Resources (MINAGRI) and is administered by the BRD Business Development Fund (BDF).

The purpose of this facility is to provide incentives for both financial institutions and for entrepreneurs to make productive investments in agriculture. The RIF 2 provides a grant for a certain portion of an investment loan taken by a beneficiary to fund projects that represent investments along the agricultural chain. Working capital or operating costs (e.g. fertilizer input costs or wages) do not qualify.

Who may benefit?

The following are eligible for application:

-Farmer associations
-Primary and secondary marketing and productive cooperatives; and
-Corporate bodies

Those that received support under RIF 1 can, in principle, obtain a second grant under the RIF 2 as well. An applicant can obtain support only once during the implementation of RIF 2.

Applicants are entitled to obtain other forms of support in parallel, and are encouraged to request support from guarantees provided by the BDF, for example under its Agricultural Guarantee Fund (AGF), and/or credit lines.

Note: Those persons among Senior Government Officials, MINAGRI, Ministry of Finance and Economic Planning (MINECOFIN) and BDF who are in any way involved in the design, decision‐making, implementation or monitoring of the RIF 2 grants program, and their immediate family members, i.e. their spouses, parents, children and siblings are excluded from participation.

What kinds of investments qualify for RIF 2 support?

The RIF 2 is supported by MINAGRI to promote investments in the agricultural sector in order to realize the high potential for growth and income generation in agriculture for Rwanda. There are three main categories of investments that qualify for RIF 2 support:

Category I (Primary Agricultural Production)

This includes investments such as machinery (e.g. feed mixers, traction equipment or irrigation equipment), construction of agricultural buildings (e.g. animal housing, breeding floors), land acquisition and improvements, storage facilities, transport facilities, etc.

Project costs can be between RWF 1‐50 million.
Loans up to RWF 10 million receive a grant of 25% of the investment loan, while loans above this receive a grant of 20% of the investment. At least 45% of the total RIF 2 facility will be used for this category

Category II (Processing of agricultural products)

This category includes processing equipment, construction of processing facilities, etc.
Project costs can be between RWF 2‐150 million.
Loans up to RWF 50 million will receive a grant of 25% of the investment loan, while loans above this will receive 20% of the investment. A maximum of 35% of the total RIF 2 facility will be used for this category

Category III (Agricultural support services)

This category includes seed chain investments, extension services, capacity building (e.g. farmer training businesses), technical assistance (e.g. extension service business) , etc.
Project costs can be between RWF 2‐150 million.
Loans will receive a grant worth 15% of the investment loan.
A maximum of 20% of the facility will be used for this category.

Other points about eligibility…

Excluded from grant support under the RIF 2 are: Projects funded by an investor from equity or loans outside the banking sector; Recurrent and operational expenses of projects including audit expenses (i.e. working capital); Minor fixed assets of a value of less than the equivalent of USD500 per item. In the case of production loans for cattle, there is a ceiling for cattle loans of USD 7 500. Note also that no more than 30% of the total amount for any RIF 2 application can be related to vehicle acquisition.

How does one access RIF2

The potential beneficiary shall write a loan application to a participating financial institution (PFI). If the loan is approved, the PFI shall make a RIF 2 grant application to BNR on behalf of the potential beneficiary.
The project should be technically feasible, financially viable, with a projected cash flow that will enable repayment within a maximum duration of 5‐6 years and a minimum of 12 months, and is in accordance with standard environmental norms.

The application should include a solid business plan with the following:
-A project description;
-An assessment of the socio‐economic impact;
-A projection of the expected purchases from local raw material suppliers;
-Detailed assumptions for the planned sales/income and expenses, including a realistic assessment of the marketing prospects;
-A realistic assessment of the sustainability of the project after the end of the loan;
-An analysis of the risks that may be encountered and the risk mitigation measures proposed by the applicant;
-A financing plan, including the investment loan, equity and other contributions of the applicant, such as a working capital loan; and
-A summary schedule of the collateral offered.

How is the grant paid?

The approved grant amount will be paid out to the investor through the designated loan account through which the respective PFI receives installments from the principal borrower. Upon signature of the loan and grant agreements by all parties, the grant will be conditionally disbursed to the PFI by the BDF. Upon total payment of principal and interest minus the grant amount, the debt will then be off‐set. In case the principal borrower would not meet her/his obligations, i.e. a delay of payment installments for more than six months, the bank will inform the principal borrower that the grant arrangement has been cancelled, and that as from now on, s/he would have to repay the entire loan amount without grants, notwithstanding any other penalties that the financial institution would foresee.

It’s worth to note that the RIF2 work with 200 financial institutions countrywide. Then, it’s up to you to come up with a convincing business plan and make your dreams a reality!

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