• AFC Land Bank’s non performing loan ratio reached 12.65%, above its 10% internal ceiling
• Management linked the deterioration to climate shocks and the concentration of agricultural lending
• Short term funding limits the bank’s capacity to finance resilience assets that can reduce future defaults

Harare- AFC Land and Development Bank is sitting on a 12.65% non-performing loan ratio which exposes a funding mismatch inside Zimbabwe’s agricultural credit system. The bank is carrying losses generated by climate exposed agriculture through short duration credit. Its own funding structure currently gives it access mainly to short term capital. Irrigation, water infrastructure and mechanisation require repayment periods extending across several production cycles. The credit problem therefore begins before a farmer misses a repayment.

The latest Auditor General report found that AFC Land Bank’s non performing loan ratio stood at 12.65% at December 31, 2025, exceeding the bank’s internal policy ceiling of 10%. The Auditor General also found weaknesses in loan management controls and identified capital adequacy and liquidity as the financial exposure created by deteriorating credit quality. Management attributed the ratio to climate shocks given the bank’s concentration in agriculture.

Agricultural concentration is embedded in AFC Land Bank’s mandate. The institution was established to provide credit and advances to individuals and organisations engaged in agriculture. Moving away from agriculture would therefore weaken the purpose of the institution.

The balance sheet has to absorb agricultural risk more intelligently. That requirement is becoming more immediate ahead of the 2026/27 production season. Zimbabwe’s Meteorological Services Department issued a preliminary El Niño warning in May, putting the probability of an El Niño phase during the coming rainy season at between 88% and 94%. The department said El Niño has historically carried a 65% probability of below normal rainfall in Zimbabwe. The warning remains preliminary, with the national seasonal outlook due after the regional climate process in August.

For a seasonal lender, uncertainty enters the loan at origination. A maize farmer can receive inputs months before the bank knows the rainfall outcome that will determine yield and repayment capacity. A facility written against rain fed production therefore transfers part of the weather cycle directly onto the lender’s balance sheet.

Stronger credit assessment can improve borrower selection. It cannot remove rainfall risk from the production cycle. AFC needs the loan structure to absorb that risk before default occurs. The bank already has parts of that architecture within the wider AFC group. Its Land Bank facilitates customers’ access to insurance through AFC Insurance and mechanisation services through AFC Leasing. Its lending platform covers production inputs including seed, fertiliser, chemicals, fuel, labour and other operating requirements.

The funding structure is the binding constraint. AFC says short term funding is currently available and that it is working on strategies to secure long term funding. Short duration money is suited to a crop that is planted, harvested and sold inside one production cycle. Irrigation equipment, boreholes, water storage, solar pumping and major mechanisation assets generate returns across several seasons.

AFC can therefore keep financing the inputs required to plant the crop and remain unable to finance enough of the infrastructure required to make repayment less dependent on rainfall.

It creates a loop that repeats every season. AFC funds the crop, a climate shock hits, yields fall, and repayments slip. Bad loans pile up, capital gets tied up, and less money is left to lend when the next season comes around. The 12.65% NPL ratio shows the bank has already breached its own risk limits.Yet AFC also has proof that structured agricultural finance works better. Those loans produce a materially stronger repayment record.

The African Development Bank reported that a Seed Revolving Fund implemented through AFC Land and Development Bank supported more than 90,957 farmers in irrigation schemes and achieved a repayment rate above 90%. The programme does not isolate the individual driver of repayment performance. It provides AFC with a concrete benchmark for structured agricultural lending.

The lesson for AFC is therefore broader than demanding more collateral. The bank needs to classify agricultural credit according to the source of repayment resilience. An irrigated farmer with crop insurance and a contracted buyer carries a different risk profile from a rain fed producer with no insured production and no predetermined market. Those borrowers should not enter the same pricing framework. AFC can build credit limits around irrigation status, insurance coverage, crop type, geographic rainfall exposure, historical yield, off take agreements and previous repayment behaviour. Those variables can then determine pricing, tenor and security requirements before capital leaves the bank.

Insurance belongs inside the lending decision. AFC Insurance already offers agricultural cover across crops and livestock against defined production risks.  The Land Bank can therefore incorporate appropriate insurance into facilities where the production risk can be transferred. The resulting premium becomes part of the cost of protecting the loan book.

Irrigation finance requires a second intervention. AFC Land Bank’s board should make long term funding for water and production infrastructure a capital priority during the 2026/27 lending cycle. The institution needs funding whose maturity matches the productive life of the asset being financed.

A five year irrigation asset funded through a short seasonal liability creates a maturity problem before the first repayment is made. The bank’s national footprint gives it another asset. AFC operates across all 10 provinces. That footprint can produce a risk database linking rainfall, crop type, irrigation, insurance, yield and repayment behaviour across multiple seasons.

That information is AFC’s edge if the bank uses it.Policy already sets the goal: get NPLs back to 10% or less. But the path matters. Shrink the loan book and the ratio improves, but so does the bank’s irrelevance to farmers. Improve risk screening, insure the loans, fund irrigation, and catch problems early,  and AFC can keep lending when seasons go bad.

For 2026/27, the board should make irrigation status, insurance, off-take contracts and climate exposure mandatory disclosures before any major facility is drawn. Arrears should be reported in those same buckets, with the NPL distribution published in the next results. Set the next audited period as the deadline. That makes the outcome testable.

Above 10% again, and climate shocks will have exposed a structural flaw in AFC’s lending. Below 10% with lending steady or up, and the bank will have proved it can manage farm risk without abandoning farming. As weather becomes more volatile, Zimbabwe needs more capital in agriculture, not less. AFC’s mandate is to make that capital weatherproof.

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