Aid for Palestinian farmers set to go, farmers cross fingers

The Palestinian Authority says it is finally ready to launch a new loan institution to assist farmers, but many suspect it will remain inoperable, like other such entities, for lack of financial resources.

al-monitor A Palestinian farmer harvests potatoes in a field in the West Bank village of al-Fara, near Jenin, March 6, 2017.  Photo by REUTERS/Abed Omar Qusini.

Oct 14, 2018

RAMALLAH, West Bank — After three years of planning, the Palestinian Agricultural Credit Institution (PACI) will begin accepting loan applications to support farmers by the end of the year, its director says, now that the government has approved funding and completed all the necessary logistical and legal arrangements. Some farmers, however, remain skeptical.

Palestinian farmers have been calling for such an organization for sometime to get around private lending institutions exploiting their need for money to impose high interest rates. The farmers are nonetheless concerned that there could be further delays in the PACI getting up and running, as has been the case with the Palestinian Agricultural Disaster Risk Reduction and Insurance Fund, which was approved in 2013 but is yet to start operations. The latter, whose mandate is to compensate farmers for losses resulting from natural disasters and the Israeli occupation, has not finalized procedures related to the funding of programs it hopes to implement and has no funding for its own operations.

The purpose of the PACI, the first government institution of its kind in Palestine, is to grant farmers soft loans, that is, loans with manageable collateral and repayment terms. Both conventional loans incurring interest and Islamic murabaha loans should be available. The PACI will also offer non-interest-bearing loans in special cases, such as for losses caused from natural disasters.

PACI Director Abdallah Lahlouh told Al-Monitor that on Sept. 24 the government approved a funding system that guarantees the institution’s independence. The PACI will be included in the state budget, with PACI officials managing the funds provided by the government and monies it receives from other institutions.

Private institutions and banks, Lahlouh said, citing PACI figures, only meet 20-25% of Palestinians' annual demand for agricultural loans, which can reach $300 million. Banks are reluctant to grant farmers loans due to the high risk, which stems in part from many farmers not having modern equipment and tools. Farmers can of course also incur huge losses due to weather conditions and other nature-related developments.

Male and female as well as young farmers are eligible for loans. Lahlouh said the PACI will target rural areas to increase investments to aid development of the agricultural sector, which is declining annually. Statistics compiled by the Palestinian Central Bureau of Statistics show that in 2017, agriculture fell to an all-time low of 2.8% of gross domestic product, compared with 18% in 2013.

“We are counting on this institution to be a lever for the agricultural sector,” Lahlouh asserted, adding that loans would vary, from microloans to amounts of up to 250,000 shekels (approximately $68,000).

PACI is now seeking partnerships with the private sector, the Palestinian Fund for Employment and Social Protection, agricultural empowerment institutions and non-governmental organizations involved in agricultural lending. While people will submit applications to the PACI, the loans will be granted through a network of partners established by it, Lahlouh explained.

The various issues farmers face have driven many to resort to other sectors to make a living. Palestinian farmers believe the government has marginalized their sector, as it only dedicates 1% of the budget to farming-related issues.

Maarouf Rabaya, from the West Bank village of Meithalun, near Jenin, told Al-Monitor that he has not received word that the PACI is soon to begin operations. “All I know is that its establishment was approved three years ago,” Rabaya remarked. Having farmed in the past, he noted that other funds for supporting farmers had also been approved, but they still exist only on paper.

Rabaya had worked in rain-fed agriculture, which faces various environment-related risks and problems, including a lack of water, and is in need of marketing opportunities to make it profitable. He said that when the PACI starts offering loans, he will immediately apply, because he needs a tractor to till his land, which is rugged. He currently can't afford one because of the high prices, and he hopes that the PACI won’t be like non-governmental lending institutions that charge high interest rates.

Younes Sobhi, a farmer from the village of al-Mughayyir, near Ramallah, also expressed concerns about interest rates. In addition to cultivating a rain-fed agricultural area, Sobhi owns more than 25 uncultivated dunams (6 acres) that need reclamation. That, however, requires more money than he brings in from selling crops. He hopes a loan will help rectify the situation. “If I can plant this additional stretch of land, my income would increase,” Sobhi explained to Al-Monitor.

Khaled Mansour, the Agricultural Development Association officer in charge of communicating with farmers about their needs, told Al-Monitor, “Farmers have wanted this institution to be operational for a long time, as it can empower them and offer them real support. They can [now] resort to a governmental institution with clear authority, instead of going to unreliable parties.”

He further stated, “Farmers are waiting to see the actual impact of governmental decisions to establish institutions and [provide] support funds amid the losses they are suffering due to the deteriorating situation of the Palestinian market, natural disasters and marketing problems.”

Like other farmers, Mansour is worried that the PACI will remain non-functioning because of the Palestinian Authority’s financial crisis. He noted that similarly to the aforementioned Agricultural Disaster Risk Reduction and Insurance Fund, the Disaster Compensation Fund was approved, five years ago, but still does not operate because of logistic and legal technicalities as well as unresolved financial issues.

Mansour sees the situation as governmental neglect of a key economic sector. If the PACI were to launch operations, it would indicate its support for the farmers and the agricultural sector, but the organization would not be structured to resolve major problems related to the lack of water resources, natural disasters and the lack of marketing channels. Such problems are growing by the day, Mansour said.

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