Farming is a major driver of Rwanda's economic growth, and the sector employs over 80 per cent of the population.

Despite this, the industry is treated as risky sector by lenders, a situation that has led to slow development of the sector. However, this could soon be history as farmers, especially those with agro-insurance, will be able to get loans to fund their projects.

Tom Mulwa, the managing director of Liaison Group, a regional risk consultancy and insurance brokerage firm, said they will partner with commercial banks and micro-finance institutions to extend loans to crop and livestock farmers.

Mulwa said farmers will, starting early next year, be able to get advances from lending institutions using agricultural insurance as security.

"The banks will take that insurance cover as security for the loans to the farmers," explained Mulwa on the sidelines of the just-concluded East African Business Summit in Kigali.

"It's a viable product for them as it makes the loan cheaper. Banks will be able to get back the loan because in the event a farmer fails to repay it, the insurance pays."

Mulwa added that the insurance premiums would be billed against the repayment of the loan so that a farmer finds it easy to repay.

The agricultural sector is a key driver of the Rwandan economy. However over the past years, prolonged drought and heavy rains have hurt crop output, thus affecting farmers' income.

Mulwa said the firm was still awaiting regulatory approval, noting that Rwandan banks are not entirely allowed to transact business that is non-core banking. He was, however, optimistic that banks would embrace the initiative.

Source - http://allafrica.com/