Government Backs Credit Facility to Empower Farmers

Agricultural Credit Program Empowers Ugandan Farmers
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The State Minister for Privatization and Investment, Evelyn Anite, expressed hope that the Agricultural Credit Facility (ACF), introduced by the government, would enable more Ugandans to participate in commercial farming. She made these comments during a stakeholder engagement session focused on assessing the ACF’s progress.

The ACF, established in 2009 through a partnership between the Ugandan government, commercial banks, Uganda Development Bank, credit institutions, and Micro-Deposit Institutions (MDIs), aims to provide accessible credit to small and large agricultural enterprises at an annual interest rate of 12%. More than Shs800 billion in credit is available to interested small-scale and large-scale farmers engaged in various agricultural value chains.

Evelyn Anite emphasized that the primary goal of the ACF is to promote the commercialization of agriculture by offering favorable short, medium, and long-term loans to interested farmers, providing better terms than commercial banks.

She noted that this initiative aligns with President Museveni and the government’s broader efforts to empower Ugandans to engage in commercial agriculture, recognizing agriculture’s significance in the country.

Anite pointed out that the ACF’s objectives include expanding market access for farmers, promoting value addition, and facilitating access to land for agricultural machinery placement.

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The Director of Finance at the Bank of Uganda, Richard Byarugaba, highlighted that ACF was designed in collaboration with the Ministry of Finance and financial institutions to ensure equitable access to the credit facility for all Ugandans in the agricultural sector. He stressed the importance of being associated with a bank that understands an applicant’s integrity, business, and cash flows to simplify loan access.

Byarugaba explained that the involvement of commercial banks was necessary because the Bank of Uganda did not have a sufficient branch network to reach all potential borrowers. Additionally, efforts are underway to change the licensing regulations for Savings and Credit Cooperative Organizations (SACCOs) to enable larger SACCOs to access ACF funding directly through the Central Bank, simplifying the process.

Liz Kassede from Equity Bank reported that the bank had already extended ACF facilities to over 11,000 farmers and anticipated continued growth in these numbers. She specified that micro-level participants could access loans ranging from Shs100,000 to Shs5 million, while small and medium-sized enterprises (SMEs) could obtain loans of up to Shs2 billion. Equity Bank not only provides funding but also supports farmers in accessing markets for their produce.

However, Kassede acknowledged that the number of loans extended to farmers was still below the target, with Equity aiming to allocate 30% of its credit to farmers.

Jimmy Ocen, the Agriculture Lending Manager at Post Bank Uganda, stated that since 2009, they had actively disbursed loans across various agricultural value chains, including production, value addition, and trade. Post Bank has provided over 600 loans, amounting to about Shs49 billion (outstanding), to farmers under the ACF. While the scheme initially targeted SMEs, it has expanded since 2018 to include smallholder farmers. Ocen reported that over 300 smallholder farmers had accessed credit, with 300 others in the application process.

Morrison Rwakakamba, Chairman of the Uganda Investment Authority (UIA), pointed out that the affordability of the ACF had contributed to increased investment in the agricultural sector, resulting in job creation. He highlighted the growth of local processing factories and expressed gratitude to the Bank of Uganda for facilitating grain trading. Rwakakamba emphasized that the government introduced the facility to boost investment in agriculture and promote value addition, offering various opportunities to investors across the sector.

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