Breaking

Government Moves to Increase Credit Access for Small Agriculture-related Entrepreneurs

In the 10th edition of the Agriculture Finance, Year Book developed jointly by the Ministry of Finance, Planning and Economic Development, the Bank of Uganda and the Economic Policy Research Centre, the focus is on the small agriculture entrepreneurs.
08 Dec 2020 19:45

Audio 3

The government has hatched a plan through which micro and small enterprises involved in the agriculture value chain will have increased access to financing, irrespective of the size.

The Agri-SMEs include smallholder farmers, roadside and market stall owners, home-based agro-processors among others. They are the least likely to find credit under the current environment, except from friends and relatives.   

In the 10th edition of the Agriculture Finance, Year Book developed jointly by the Ministry of Finance, Planning and Economic Development, the Bank of Uganda and the Economic Policy Research Centre, the focus is on the small agriculture entrepreneurs.

The book notes that the limited financial investment for the agriculture sector is one of the major bottlenecks to improved productivity and hence limited agricultural commercialization in Uganda. 

According to the Bank of Uganda, only 12.9% of private-sector credit is offered to the agriculture sector despite its major contribution to rural employment, food security and exports.  This has worsened because of the Covid-19 pandemic that has made agricultural enterprises, especially farming seems riskier to lend to.     EPRC Director for Research, Ibrahim Kasirye says the interventions the Bank Of Uganda introduced at the onset of the pandemic in March including loan re-scheduling, reduction in electronic banking costs, haven’t helped the entrepreneurs much.     

//”Cue in: The pandemic has had….       

Cue out: …. Land inventories.”//    

The Year Book on the theme “Digitalizing Agricultural Financing to Boost Agricultural Commercialization in Uganda” notes that digitalization will support risk assessment of enterprises by lenders, improve record-keeping and financial literacy, speed up lending processes while reducing transaction costs for service providers.

The problem to this, however, remains the limited access to the internet and mobile phones among rural entrepreneurs, which prohibits even the micro-loans that banks give through mobile money platforms.

The reluctance of the small income earners to fully embrace the mobile money platforms will also likely hinder the success of the digitalization of the financial services for the sector. One of the issues remains mindset change towards mobile money.

Most low-income earners prefer cash payments compared to mobile money. Moreover, when they accept mobile money, they ask for a withdrawal charge, meaning they are going to withdraw the money and spend it in cash, which makes mobile money expensive.             

Bank of Uganda Deputy Governor, Michael Atingi-Ego says they will make sure that the Agriculture Credit Facility continues to benefit more and more small agriculturists, unlike previously where only large and formal enterprises.

//“Cue in: In the past…. 

 

Cue out…. Among others.”//   

Atingi-Ego says the refusal by commercial banks to lower interest rates inline with the Central Bank’s policies has far-reaching effects including discouraging low-income earners from going to them for credit, on top of the many and difficult terms the banks set.

He says the plan will ensure the smallholder agri-entrepreneurs overcome this, since they will be able to get financial services digitally.

//”Cue in: Digitalization offers….  

Cue out: …. In the rural areas.”//

Keywords

Entities