The chief regulator of the microfinance industry, Edith Namugga Tusubira, had accused commercial banks of sidelining the agriculture sector for financial services despite the sector’s critical position in Uganda’s economy.
Tusubira, the Commissioner, Microfinance Regulation Department at the Ministry of Finance, Planning and Economic Development says that banks know that agriculture is the backbone of the economy, employing more than a third of the country’s working population and accounting for a quarter of the GDP. But disturbingly, she says, the lenders say farming is not an attractive sector to lend to and hence make conditions for lending very difficult.
According to her, lending to farmers should be tailored to their needs and the specific characteristics of the business. “Lending for a month when crop takes six months, is not fair and reasonable, she says, adding that lending at more than 30 percent cannot make business sense,” Tusubira says.
She adds that that is why some of them fail to pay, through some actually do not want t pay and then run to the regulator when the lender comes for them.
She was speaking at the launch of a new financing programme by the Kingdom of Netherlands embassy in Uganda, in partnership with Pearl Capital Partners (PCP).
Stressing the case for affordable agricultural credit, Tusubira says government’s 15-year Tenfold Growth Strategy heavily relies on agriculture because the tens of thousands of micros, small and medium enterprises the strategy is banking on are dominated by the agriculture sector.
She says she will continue rooting for better access by smallholder farmers to affordable and meaningful finance especially through savings and credit cooperative societies (SACCOs).
The new 2-million-euro (8 billion shillings) financing programme under the Smallholder Credit Fund brings the total financing package to 8 million euros (32 billion shillings) since the project, originally the Diary and Horticulture Credit Fund, was launched in 2022.
Edward Isingoma Matsiko, Managing Partner at PCP says that currently they lend at 2 percent per month, but they hoe to take reduce this to below that.
He says their aim, apart from enabling smallholder farmers access affordable finance, is to dispel the view by the financial industry that lending to agriculture is bad or risky business. Dr Isingoma says says that farmers know what they want but that lenders are frustrating them.
Bouwe-Jan Smeding, Deputy Head of Mission and Head of Development Cooperation at the Embassy of the Netherlands noted that Uganda’s agriculture sector has many challenges especially regarding lending, extension services, poor quality inputs, among others.
He, however, says that the fact that of the 20,000 farmers reached, no of them has defaulted on payment, is testament that a well-thought-out lending plan for farmers can be a success.
The ambassador says that while they expect the additional financing to make even more impact, it is still too little and that they will continue sourcing for more.
The programme focuses more on women and youth, who so far account for 45% and 25%respectively of the beneficiaries of the 37.7 billion shillings in credit accessed by the last mile smallholder farmers.
With the additional funds, the plan is to take the number of beneficiaries of the credit financing to 80,000 farmers by 2030. The project operates in Busoga, Rwenzori, Kigezi, Ankole, Lango Elgon/Sebei and Central regions-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
