Risk management practices in agricultural financing: the case of selected banks in Tanzania

The main objective of the study was to examine risk management tools available to mitigate agricultural financing risks. The study was conducted to three selected banks in Dar es Salaam namely, NMB, TIB and CRDB. The study employed descriptive design methodology while sampling procedure deployed purposive technique in which specific data on issues of agricultural financing were gathered, specifically from agricultural financing departments of the banks. Primary data were collected by using semi-structured questionnaires and secondary data were collected by way of documentary review. Sixty (60) questionnaires were distributed and 55 questionnaires were returned. A response of 92% and was considered as reasonable response. Data collected were synthesized using statistical package, SPSS and the findings were presented using simple statistics. The research questions were attested by using Chi-square method. The study findings revealed a number of agricultural financing risks facing banks. Also, the study findings revealed that banks deployed a combination of various risk management tools. In addition, the outcome of the Chi-square test indicated that there was statistical significant relationship between risk mitigation and agricultural lending. From the findings, the study concluded that the availability of different risk management tools would lead into increased lending to the agricultural sector. On the other hand, the study found that there were many other challenges facing lenders. From the conclusion drawn, the study recommends that banks should deploy a combination of different types of tools to manage agricultural risks and should provide trainings to its staff on agricultural production. Also, the government and policy makers are urged to provide necessary support to the agricultural sector such as strengthening extension service system, surveying lands for collateralization purpose, investing in rural roads to facilitate transportation of goods if agricultural productivity is to be achieved.