NMB was to extend credit facilities to agro-dealers based on the bank’s lending policies and procedures for overdraft facilities. Eligible agro dealers were required to pledge collateral covering the overdraft facility to at least 62.5% of forced sale value. All agro dealers operating in the approved districts had to receive comprehensive training from CNFA (Citizen Network for Foreign Affairs) on business management.

The Guarantee scheme helped agro-dealers to overcome collateral requirements and get access to finance in the form of an overdraft facility at relatively favourable terms. The combination with the Voucher scheme (input subsidy from the government), enabled farmers to access inputs on a wider scale than before. The Guarantee scheme (and resulting credit facilities – mainly overdraft) allows dealers to stock up on inputs, while the Voucher scheme enables farmers to buy these inputs at a reduced price. The project was implemented in twelve regions covering 38 districts. The regions covered by the Scheme include: Mbeya, Iringa, Ruvuma, Morogoro, Kilimanjaro, Arusha, Manyara, Rukwa, Mwanza, Mara, Shinyanga and Kigoma.

In the three years period, the project was implemented in all targeted 38 districts and cumulatively a total of 966 new agro dealers benefited from the scheme with total cumulative approved loan amount of TZS 13.27 billion. This level of achievement could not have been reached if there was no guarantee scheme.

• It helped the agro-dealers to increase their sales and stock levels.
• It enabled farmers to access seeds and fertilizer in larger quantities (and in some cases better quality) as well as timely than before the scheme.
• It enabled the bank to strengthen its position in the agribusiness sector.
• The project has enabled FSDT to achieve its main goal of facilitating access to finance to Micro, Small and Medium Enterprises (MSMEs) in the agricultural sector and proved FSDT with lessons learned on the effects of a guarantee fund which may be replicated in other agricultural value chains.

• Selection of the agro-dealers: Experience from the three years of the scheme shows that a strict selection of the eligible agro-dealers based on the bank’s own criteria is essential for reducing default rates and increasing the impact of the scheme. These selection criteria should be based on business and financial considerations. In other words, the target group should be real entrepreneurs with a sustainable business as agro-dealers.
•  Training of the agro-dealers: Sufficient training is needed for both, new as well as existing agro-dealers. The training needs to be followed up by “on-the-job counseling” or business clinics to address specific issues that agro-dealers encounter on an ongoing basis. An important role should also be played by bank’s loan officers in helping agro-dealers make optimal use of the overdraft.
• Procedures at the bank: The bank should simplify the process and procedure to allow loan applications move fast without compromising quality. For instance, banks should allow decisions and/or approval to be done at the Branch or Zonal level instead of everything being handled at the Headquarters (centralized). This will enable agro-dealers avoid delays in meeting seasonal crop demands.
• The voucher system: The government subsidy voucher system may need to be automated to allow for fast and efficient payments flow through an electronic system.
• Monitoring of Project: Monitoring is an important component for the guarantee scheme to work well. Activities need to include 1) guarantors to provide pro-active follow-up to the Guarantee scheme, including periodic field visits to be able to assess the effects of the scheme on the target group, 2) ensure timely and adequate reporting by the bank on the portfolio status, including expired and written off credit facilities, on a regular (e.g. quarterly) basis; 3) any variances or inconsistencies in the reporting should receive clarifications and suggested measures for improvements.
• Design and documentation of the guarantee scheme: The structural design of the guarantee needs to be established from the onset of the scheme. This includes exit strategy as well as proper documentation (i.e. Guarantee Agreement)