The development was announced by the Minister of Finance and Economic Planning, Dr. Uzziel Ndagijimana during a consultative meeting organized by the Upper House of Parliament to discuss persistent challenges hindering easy access to financial services among citizens.

Pointed out challenges include high interest rates ranging between 16% and 24%.

Another discussed issue is the low percentage of funds loaned to the agriculture sector (five percent) yet it constitutes 70% of the labour force.

The low percentage is mainly attributed to risks associated with the sector and lack of collateral to be presented to banks.

Sometimes, it can take long for farmers to repay the loan yet lenders need to provide loans to other clients.

Noël Muhawenimana, the Chief Executive Officer of Umutanguha Finance Company Plc has said that 35% of its loan portfolio was allocated to farmers last year.

Muhawenimana revealed that waiting farmers to repay the loan after harvesting time takes long time and might affect operations.

He pointed out an example of the agriculture of Irish potatoes which might take up to five months to reach the harvesting time yet the bank needs the money to serve more clients.

“In such situation, we seek loans from foreign banks which are offered at high interest rate like 13%. That is why we also offer the loan to the farmer at 20% or 22%. With such rate, the farmer cannot generate expected profits,” observed Muhawenimana.

Minister Ndagijimana has said that the anticipated Rwf300 billion project will leave farmers accessing cheaper loans as they will be subsided by the government.

“It is a new project. Funds have not yet been released for the project to begin but we have identified requirements and hope that implementation will start in the near future,” he disclosed.

Once the project begins, Minister Ndagijimana explained, the funds will be channeled through financial institutions to provide loans to farmers.

“With this project, the interest rate might reduce from 24% currently charged by institutions like Umurenge Sacco to 10% or below the percentage,” he stated.

Agriculture accounts for 70% of the labour force in Rwanda.