Commercial banks in Fiji currently hold approximately $3 billion in excess liquidity, which is earning minimal interest rates. This situation reflects a notable opportunity for growth, as banks are more than willing to lend to viable projects that demonstrate a solid balance sheet and consistent cash flow, as emphasized by Reserve Bank of Fiji (RBF) Governor Ariff Ali during a submission to the Parliamentary Standing Committee on Economic Affairs earlier this month.
A pressing concern raised during the meeting was the adherence of commercial banks to the Agriculture and Renewable Energy Loans Ratio, a policy instituted by the RBF in 2012, which mandates banks to allocate four percent of their deposits to agriculture loans and two percent for renewable energy projects. However, Governor Ali noted that lending to the agriculture sector, primarily as a result of the decline in the sugar industry, has decreased. He pointed out a substantial decline in sugar production, which has fallen from around 400,000 tonnes in the late 1990s to approximately 1.3 million tonnes last year, marking the lowest output in 61 years.
The governor emphasized the need for large agricultural projects that can collaborate with small farms, calling for collective efforts from all stakeholders to revitalize agriculture, particularly focusing on the sugar sector which has faced significant challenges. Educating farmers on maintaining a positive cash flow and developing comprehensive balance sheets is essential, as banks prioritize these aspects when considering loans.
This ongoing narrative is echoed by various stakeholders including Raj Sharma, CEO of the Sugar Cane Growers Fund, who has previously highlighted the limited access to credit as a barrier for Fiji’s agriculture sector. Sharma noted that less than three percent of total loans are allocated to agriculture, significantly below the recommended minimum. Immediate actions are advocated, such as implementing zero-interest loans and expanding financial support.
Amid these challenges, there remains hope for the agricultural sector. Engagement with young generations, modernization of agricultural practices, and collaboration between government and financial institutions can pave the way for a more resilient agriculture landscape. Such strategic investments could significantly enhance Fiji’s economic stability and food security while offering opportunities for local farmers to thrive.
Investing in the agricultural sector not only fosters economic growth but also ensures that it continues to play a vital role in supporting the livelihoods of a substantial portion of the Fijian population. With the right support and initiatives, Fiji’s agriculture sector may witness a rejuvenation, benefiting both the economy and communities across the nation.
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