Banks say agreement in place to accept 99-year leases as collateral

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HARARE,– Zimbabwean banks are willing to accept government issued 99-year leases as collateral for loans to farmers, an official has said.

The lease is a legally binding agreement between the now Ministry of Lands, Agriculture and Rural Resettlement on behalf of the government who is the Lessor and the farmer who is the lessee.

Advocacy Officer for the Bankers Association of Zimbabwe (BAZ), Clive Mphambela said banks and the government had already reached an agreement on the issue of the 99 years lease and banks are willing to assist farmers with loans.

“There was engagement between the banks and the ministry of lands on various aspects of the 99-year lease and in that engagement banks reached a comfortable position, but the outstanding issue is that there are actually no farmers known to us as banks who actually hold the leases,” Mphambela said.

He said banks are waiting for the lease document to start their credit assessment process.

“We are waiting for those leases so that we can the incorporate the document in the formal credit assessment process. The issue is really on the part of government , they need to speed up the actual rollout of the instrument so that farmers are then able to approach banks to get access to loans”.

Mphambela said the lease had to address issues of security and transfer of the tenure.

“However the lease on itself is not a guarantee to get credit but the farmer has to prove that he is a good farmer and has reasonable assurance to stay and invest on the farm for a reasonable time to enable a financial institution to make an informed risk assessment. As such, the security of tenure element needs to be addressed in the lease,” Mphambela said.

This is done to avoid situations where a farmer is kicked off the farm without recourse which will then prejudice the bank that has extended the loan.

“The second issue is transfer of tenure, the land should come with secure transfer rights to land so that banks can be able to transfer its exposure from one leaseholder to another without loss of funds.” – Source