By John Masaba
Evelyn Anite, the state minister for investment, has revealed that the Agricultural Credit Facility (ACF) has grown by over 25%, benefiting a total of 3,455 Ugandan farmers as well as small and medium enterprises (SMEs), especially those engaged in agro-processing.
According to Anite, the fund has grown from an initial sh200b that left the Treasury in 2009 to facilitate ACF, to sh815b as of June this year.
“I am excited for those who have been able to access the money. That means if more funds were injected into the programme, we would be able to create a big difference,” Anite said.
The state minister noted that plans are underway to bring the lending rate further down from 12% in a bid to create a multiplier effect and spur development in the sector. To increase the reach of the facility, Anite said her ministry is launching a nationwide campaign aimed at unlocking the potential for enhancing citizens’ investment prospects.
“I urge the disbursing monetary institutions to improve their communication strategies and, if feasible, consider offering single-digit interest rates to alleviate the fear of borrowers losing their assets like houses and cars to loan repayment. But the beneficiaries must refrain from diverting these resources into non-profitable purposes, such as extravagant weddings or elaborate graduation parties,” she suggested.
Anite made the remarks during an engagement between journalists and ministry officials at the finance ministry offices in Kampala last Wednesday.
Liz Kasedde from Equity Bank who participated virtually said they have previously disbursed agricultural loans, but encountered losses due to borrowers’ misuse of funds.
However, this problem has been addressed by conducting market research and understanding post-harvest handling before venturing into specific agricultural crops, such as coffee, pineapples, or passion fruits.
Jimmy Ocen, the agriculture financing officer at PostBank Uganda, shared insights into the initial disbursement of sh818m in the cattle corridor regions of central and western Uganda.
The funding was intended to help herders improve their livestock, construct shelters, and establish spray lanes.
The requirements for accessing these funds include a comprehensive project plan, accurate financial records, business projections, and specific project locations.
“We supported ventures ranging from planting crops to poultry, piggery and rabbit farming. Soil specialists are now incorporated to assess soil quality and its suitability for specific crops, given the challenges posed by climate change, such as floods and droughts,” Ocen elaborated.
The main objective of the ACF is to promote the commercialisation of agriculture through the provision of short-, medium-, and long-term financing to projects engaged in agriculture, grain trade, agro-processing, modernisation, and mechanization.
The maximum loan amount is up to sh2.1b. However, the limit can be lifted on a case-by-case basis for eligible projects that add significant value to the agricultural sector and the economy.
According to Byarugaba, the maximum and minimum loan periods should not exceed eight years and six months, respectively. The grace period is up to a maximum of three years.
As for the grain trade, there is no grace period. For the financing of grain trade, the scheme provides financing for working capital for projects engaged in trading. The maximum loan amount is sh10b.
However, Byarugaba said this limit can be lifted on a case-by-casebasis for eligible projects that add value to agriculture.
Morrison Rwakakamba, the chairperson of Uganda Investment Authority, said under ACF, the government contributes 50% of the sum while dispensing banks, which currently stand at 24, contribute 50%.
Eligible beneficiaries include businesses or individuals, partnerships, companies, and SACCOs (whether small, medium, or large in size) operating in Uganda and engaged in agriculture, agro-processing, and grain trade, among others.
Borrowing under the facilities is currently at an interest rate of 12%, which is lower than the current commercial rates, which are above 20%.
According to Richard Byarugaba, the acting executive director finance at Bank of Uganda, in order for one to access the money, they have to be involved in selected sectors that include agricultural and agro-processing machinery and equipment, post-harvest storage facilities, agricultural inputs, the acquisition of agricultural machinery for renting to other farmers, and the purchase of biological assets up to a maximum of sh80m.