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JTI abandons banks in IPS because of “exorbitant” loan interest rates

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JTI Leaf Malawi has stopped using Malawian banks for the provision of financing to its contracted growers because of what it calls “exorbitant” interests rates being charged by financial institutions in the country.

JTI Leaf Malawi managing director, Fries Vanneste, says starting this growing season, JTI will use its own resources for the provision of loans to contracted growers under the Integrated Production System (IPS).

“The interest rates in Malawi’s banks are just too expensive. We have decided to start providing the loans ourselves for the benefit of our growers,” said Vanneste.

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He said the new grower financing facility is also denominated in United States dollars to reduce exposure to Malawi kwacha fluctuations and that interest rates are much lower.

“The interest rate will also be calculated once on the principal sum and will not be compounded. This makes our loans cheaper and beneficial to our growers,” said Vanneste.

He says with the new grower loan facility, the company expects the take home income of its growers to increase unlike the case with bank financed loans.

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“We want to see our growers reaping the real benefits from their toil and this can only be the achieved when their take home [margin] is meaningful,” said Vanneste.

For growers to access loans from JTI, they are expected to register for volume with the Tobacco Control Commission (TCC), open an account with a designated bank as well as have a good history in terms of loan repayment and volume deliveries.

The growers, says JTI, should also be willing and available to follow Minimum Agronomy Standards, have sufficient land and be actively involved in live barn initiative and must not be involved in child labour.

They must also take interest in the elimination of nontobacco related materials (NTRM).

JTI leaf technicians are responsible for screening and identifying potential growers to benefit from the loan facility.

Loan repayments will be done at the start of tobacco sales and incentives will be given to growers who will repay their loans early. The loan facility will also be a recurrent process and growers who will pay back their loans and deliver their volumes accordingly will qualify for next seasons’ loans disbursements, according to JTI.

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