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UGX 818 Billion Agricultural credit facility growth

UGX 818 Billion Agricultural credit facility growth

Loans under the ACF are disbursed to farmers and agro-processors at 12% per annum. (Courtesy photo)

The Agricultural Credit Facility (ACF), a partnership between the Government of Uganda and various financial institutions, boasts an impressive UGX 818 billion ($220 million) available for small to large-scale farmers across the agricultural value chain.

A discussion was held on X (formerly Twitter), shedding light on the credibility of this facillty, which involved major stake holders, together with Hon. Evelyn Anite, Uganda’s Minister of State for Finance, Planning, and Economic Development.

This transformative initiative aligns with President Yoweri Museveni’s vision of shifting Ugandans from subsistence farming to commercial agriculture.

Since its inception in October 2009, the scheme has been instrumental in promoting the commercialization of agriculture, offering short, medium, and long-term loans at favorable terms, with an interest rate of 12% per annum.

The ACF operates through Participating Financial Institutions (PFIs), including commercial banks, Uganda Development Bank Ltd (UDBL), Micro Deposit Taking Institutions (MDIs), and Credit Institutions. The central bank, Bank of Uganda (BoU), administers the scheme, with guidance from a Memorandum of Understanding signed by all stakeholders.

The Ministry of Finance, Planning, and Economic Development represents the Government of Uganda in this initiative.

A Diverse Group of Stakeholders

The ACF’s design prioritizes transparency and accessibility. According to Richard Byarugaba, Director Financing at Bank of Uganda, commercial banks contribute 50% to the facility, along with the central bank, while MDIs contribute 30%, with BoU adding 70%.

To ensure accountability, commercial banks regularly report to Bank of Uganda. If they are found to be lending at interest rates exceeding 12%, they are held accountable.

Morrison Rwakakamba, Chairman of Uganda Investment Authority, highlights that the government’s commitment to boosting agricultural production and value addition.

He praised the cooperation between the central bank and participating banks, emphasizing that Bank of Uganda’s 50% contribution aligns with the mission to add value to Uganda’s agricultural sector.

Inclusive Access to Credit

Ocen Jimmy, Manager of Agriculture Lending at Post Bank Uganda, shared the success of their efforts, with over 670 loans worth approximately UGX 49 billion ($13 million) disbursed.

Their focus has been on the cattle corridors, particularly in the central and western regions. Post Bank Uganda has enabled 300 smallholder farmers to access the ACF, with 300 more awaiting assistance. They are eager to finance a variety of projects within the agricultural value chain, emphasizing the importance of maintaining production records.

Equity Bank’s Liz Kassede highlighted their partnership with Bank of Uganda and their goal to allocate 30% of the ACF to agriculture. So far, they have extended loans to over 1,115 individuals, amounting to UGX 49 billion.

Room for Improvement

While the ACF has undoubtedly made strides in advancing Uganda’s agricultural sector, public sentiment suggests room for improvement. Many participants in the X-Space discussion called for a reduction in the 12% interest rate, which they believe remains high.

Additionally, they urged the expansion of the ACF and an increase in the maximum borrowing limit.

As the ACF continues to grow and evolve, it is clear that the government and participating financial institutions must work collaboratively to address these concerns.

The ACF stands as a crucial tool in the transformation of Uganda’s agricultural landscape, and its success will depend on responsive and adaptable policies.

In conclusion, Uganda’s ACF has emerged as a powerful resource to drive the commercialization of agriculture. With the support of various stakeholders, including the government, commercial banks, and microfinance institutions, it has the potential to significantly boost agricultural productivity and value addition.

However, addressing concerns about interest rates and expanding access will be key to its continued success.

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