Announcement of Five Million Dollar Credit for Agriculture in Tanzania on January 13, 1966

~- • L."lTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 66/2 Subject: $5 million Cred1.t for Agri- January 13, 1966 culture in tanzania The International Development Association, an affiliate of the World Bank, has mede a .credit of $5 million to the United Republic of Tanzania. The funds will be made available to the National Development Credit Agency (NDCA) to assist in financing a four-year lending program for agriculture. The program will increase the incomes of thousands of small farmers and encourage the use of savings for fCO• ductive investment; it will also pennit t!1e widespread adoption of improved tech- • niques of production. The program is a small but important part of Tanzania's Five-Year Pl~n (1964-69) for economic and social development. It is expected to increase the country's net foreign exchange earnings by more than $5 million an- nually through increased production or improved quality of such export commodities as cotton, coffee, tobacco, sisal, tea and pyrethrum, and the growing of more food for home consumption. The preparation of this project was assisted by an expert of the Food and Agriculture Organization of the United Nations (FAO) and by an FAO mission under the Bank/FAO cooper~tive program. While subsistence agriculture is still predominant in Tanzania, one of the most striking trends in recent years has been the rapid increase in the produc- tion by small farmers of cash crops, particularly export crops. Most of the countryes coffee and cotton is now produced on small farms and their share of • other crops is growing. Underlying this development has been the growth of co- operative ma~keting societies; they now number approximately 1,200 and have a  2 - ·~ total member~hip of half a million. The cooperatives market aboat Bot of the cash ~ crops grown on small f~rms and they are now beginning to branch out into new are!lo, 3uch as processing, estate and group farming, and agricultural extension work on farms. Furtherreore, the cooperative system provides the main channel through which credit :la extended to the agricultural sector. The National Development Credit Agency is the only local institutional sour.ce of investment funds for small-scale agriculture. The N!>CA has been organ.ized in its present form for only a.bout a year. As a result of the rapid conunitment of its uwn limited resources, its lending opt?,.. ations are now h:n11.dicapped by a shortcge of funds. The IDA credit, by permitting NDCA to continue and expand its operations, will fill ~rt importnnt gap in the supply of investment funds in Tanzania. The four-year NDCA lending program being assisted by the IDA credit includes • about 18 individual schemes and covers practically all the major agricultural products of Tanzania, as well as dairy products and fish. The NDCA will chan~al its loans to farmers through the cooperatives and lend directly to the cooperatives themselves. Nearly two-fifths of the IDA credit will be used to create revolving funds to provide short-term crecit to farmers to purchase fertilizers for cotton and pesticides for coffee. After an initial period of IDA assi&tance for these purposes, local resources within the cooperatives will be sufficient to finance fertilizers and pesticides without further borrowing from the NDCA. IDA funds will be u3ed for medium-term credit to farmers and ·cooperatives for the purcha1e of a variety of farming, dairying and fishing equipment, ranging in size and com- plexity from self-propelled wheat combines to knapsack sprayers and nylon fishing nets. Approximately two-fifths of the credit will be used for the extension of long-term credit to farmers and cooperatives for the developm~nt of cash crops and cooperative-owned processing plants. This will include the development of •  I .) . - 3 - • smallholdings and related processing plants for tea and sisal, the construction of cooperative-owned central coffee pulperies and pyrethrum dryers, a castor-seed pr·ocessing plant, and a tobacco dryer and reconditioner. In orde:.r to help the NDCA to administer the program, the IDA credit will also finance the services or technicians and agricultural specialists. Total inveutment in the program over the period 1965-69 is expected to be equivalent to about $7.5 million. The IDA credit will provide some 70% of the required finan~ing and the remainder will be met from the NDCA's own resources, cooperatives, and other investors, including the Government. The procurement of most items financed will be through regular commercial channels. Tanzani"1. hae a well-organized system of dealerships with suppliers from all the major countr:f.es exporting farm and processing machinery and equipmenL, fertilizers and pesticides. The ID~ credit is for a term of 50 years. Repayment of principal will begin • Octcber 1, 1975, after a 10-year period of grace. Thereafter, 1% of the principal will be repayable annually for 10 years and 3% will be repayable ·annually for the final 30 years. The credit is free of interest: but a service charge of 3/4 of 11. per annum on the amount withdrawn and outstanding will be made to meet IDA's administrative costs. Approximately $4.4 million of the credit will be relent by the Government of Tanzania to the NDCA for a term of 20 years with interest at 3-1/4% for use in the NDCA's credit operations. The balance of $600,000 will pay for the foreign ex- change costs of technicians and agricultural specialists required to help the NDCA ca~ry out iLS operations effectively • •