Lending to Agribusinesses in Zambia

This article compares the lending mechanisms of MFIs with that of a successful agribusiness lending institution, the ZATAC Investment Fund (ZIF) in Zambia. While MFIs focused on lending to consumers and retail-type microenterprises have realized high repayment rates, few MFIs focused on lending to agricultural producers have achieved comparable success. ZIF is an agribusiness lending program in Zambia that, after five years in operation, has become a major vehicle for increasing the incomes of rural agricultural producers. Findings indicate that ZIF uses:

• Progressive lending and group lending contracts adapted to suit seasonal agricultural production credit requirements;
• Various forms of collateral substitutes like other MFIs;
• Other mechanisms such as automatic loan repayments tied to production, cooperative sanctions, contracted production and provision of business development services to improve loan repayments. 

While ZATAC's methods resemble the lending mechanisms of MFIs worldwide, differences between the two models exceed similarities. Some of the differences result from seasonal agricultural production and its unique credit needs.