While agriculture remains a key economic activity in Africa, employing about 55% of the
population, only approximately 1% of bank lending goes to the agricultural sector. This
phenomenological case study explored the financing of small- and medium-scale farmers in
Namibia. Farmers on the demand side and financial institutions on the supply side
constituted the population from which the researcher drew the study sample. Multiple
methods of data collection were used, including conducting interviews, secondary data and
document analysis. The results of the study were compiled into four different but
thematically connected research essays.
The first essay investigates the constraints to financing agriculture in Namibia from the
perspectives of small- and medium-scale farmers and the Agricultural Bank of Namibia
(Agribank). The findings on the supply side (Agribank) reveal constraints such as a lack of
collateral and poor loan recovery from farmers while on the demand side, insufficient
capital, bureaucracy and a lack of collateral are among some of the constraints preventing
farmers from successfully financing their agricultural activities. Finance is found to be a
binding constraint.
The second essay identifies financing options for agricultural SMEs (apart from Agribank).
The essay indicates that only about 33% of formal financial institutions are providing
finance to agricultural SMEs, with lack of expertise and perception of risk in financing
agriculture cited as top reasons why formal financial institutions find it hard to provide
finance to agricultural SMEs. On the demand side, the majority of non- Green Scheme
farmers indicated that they were unaware of financing options in the country while those in
Green Scheme projects pointed to Agribank as the only bank that they knew.
The third essay assesses the agricultural SME finance gap. The estimated agricultural finance
gap stands at N$63 520 512, with demand more than supply. On the demand side, problems
causing the finance gap within Green Scheme farming projects include loan default and thus
denial of further loans and lack of financial institutions in the country. On the supply side,
loan default and dishonesty by farmers limit Agribank’s supply of loans, especially to smallscale
communal farmers.
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The fourth essay asks what we can learn from successful nations in agricultural finance, such
as Brazil and Indonesia, as compared to Namibia, given the above findings. The findings
show that Agribank-supported Green Scheme projects in Namibia mark government’s effort
in promoting agricultural productivity and access to finance by small- and medium-scale
farmers. However, Namibia lacks agricultural financing expertise and farmers have poor
access to markets, making it difficult to improve their farming practices. Brazil has adopted
structured demand to promote access to markets and flexible repayment terms matched to
production cycles. Indonesia addresses market failure in the agricultural industry through
investing heavily in irrigation and improved provision of formal sector credit.
As compared to previous studies, this study contributes to the body of knowledge relating to
SMEs in the agricultural sector by focusing on the financial aspect both from the supply and
the demand side using primary data.