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  • Cashew co-op struggles to secure Sh173bn loan

    Feb 18th, 2016

    The Tandahimba Newala Cooperative Union (Tanecu) has unsuccessfully been seeking to get a loan from TIB Development Bank for almost two years now. Sh173.2 billion ($86.6 million) is required for a project to construct a cashew-nut processing factory in Tandahima, but Tanecu is unable to meet the TIB loan conditions.

    TIB Development Bank Managing Director Peter Noni told BusinessWeek, that the bank had set aside Sh173.2 billion, but the project is yet to start due to Tanecu’s failure to meet loan conditions including capacity to raise 40 per cent of the total credit.

    “We are committed to financing the project for constructing the factory in Tandahimba, but we are yet to approve it because first of all they have to provide proof on the ability to repay the loan within six years,” said Mr Noni.

    According to him, other conditions for the loan with Tanecu include the ability to recover it at an annual interest rate payment of 16.5 per cent and the provision of information related to the union’s equity. “Tanecu is supposed to furnish us with a working document that the loan will be recovered within six years with an annual interest rate of 16.5 per cent. They can look for a partner within or outside the country to raise 40 per cent of the loanable funds. We are still waiting for them.”

    However, Mr Noni hopes that the loan will be released not later than this year.

    The director general of the Cashew nut Board of Tanzania (CBT), Mr Mfaume Juma, is aware about the Tanecu project, but said the issue was within the mandate of the union and the bank. “We were contacted by Tanecu to provide advice when the feasibility study for the project was being conducted. But now we are still waiting for them to come again to us if the need arises. We will be ready to provide advice, for example, on the licensing process,” said Mr Juma. According to him, the project is important for value addition of cashew nuts bearing in mind that for many years Tanzania has been exporting raw cashew nuts.

    He said cashew processing would create jobs and enable the country to earn more forex.

    The plan to establish the Tandahimba factory started in 2013 when TIB entered into an agreement with the African Cashew nut Alliance (ACA) for conducting a feasibility study for the project, according to ACA’s 2013 report.

    In the same year, ACA awarded TIB Development Bank a contract to produce a feasibility study and business plan for constructing a cashew nut factory, according to the report. According to Mr Noni, upon completion of the project, 15,000 raw cashew nuts will be processed annually. At least 80,000 cashew farmers in Lindi and Tandahimba districts will benefit from the project. Stakeholders of cashew nut farming have been calling for the establishment of cashew nut processing factories to reduce the volume of raw cashew exports to India.