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 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
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
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
//”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
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
//“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.