Farmers Ask Gov’t to Relax Conditions for Agriculture Credit Facility to Mitigate COVID-19 Effects

Farmers in Uganda
farmers in Uganda

Farmers in Uganda have decried the stringent conditions that were set by the government in order for them to be able to access funds from the Bank of Uganda through the Agriculture Credit Facility, such that they can mitigate the adverse impact of the Coronavirus (COVID-19) pandemic on the agricultural sector.

It should be noted that Uganda’s food security is heavily threatened and the future of agribusiness is bleak, because of the prevailing consequent effects of the COVID-19 pandemic.

As a result of this pertinent issue, Absa Bank Uganda on August 20, 2020, organized an online agribusiness meeting, during which experts discussed various matters affecting agribusiness and agripreneurship, although the most important matter discussed was the possibility of government relaxing the conditions set for farmers in Uganda so as to be able to access government funding.

Based on the topic; An Outlook On Agribusiness in Uganda Amidst The COVID-19 Pandemic’, experts who attended the meeting that was moderated by Edward Katende, the Chief Executive Officer for Uganda Agribusiness Alliance (UAA), aimed at discussing how agribusiness enterprises can overcome the effects of COVID-19 and remain profitable yet contributing to economic growth and ensuring food security in the country.

 As one of the measures of helping farmers in Uganda to overcome the effects of COVID-19 on the agricultural sector, the government of Uganda announced the Agriculture Credit Facility, which is being coordinated by the Ministry of Agriculture, Animal Industry, and Fisheries (MAAI) through the Bank of Uganda.

However, many agripreneurs and proprietors of agribusiness enterprises contend that accessing the credit facility is next to impossible due to the numerous conditions they have to fulfill before they can access the funds, many of which they say is impossible.

The experts made it expressly clear that sector investors are willing to invest more and expand the agribusiness sector, but are worried about the historical challenges they have been facing, many of which rotate around under-funding, adverse climatic conditions, pests and diseases, absence of avenues for value addition, among others.

According to the experts who attended the forum, the agribusiness sector involves businesses of all sizes and multiple supply chains from production to distribution, marketing, and consumption, which all need funding at some level.

James Kanyije, the managing director at KK Fresh Produce Exporters Limited, who was also on the forum, pleaded with the government to relax the conditions attached to extending funding under the Agriculture Credit Facility, saying the conditions are frustrating agribusiness enterprises.

Kanyije explained that “We hear the money is there, but getting it is a problem,” adding that “We need to protect the producer.”

He noted that in the horticulture sector alone, farmers in Uganda lose 64% at farm gate and 14% in the market due to lack of required infrastructure such as irrigation, transport facilities, capital, extension services, market information, yet the situation has been worsened by COVID-19, which has affected agricultural production.

Also on the forum was Mumba Kalifungwa, the Managing Director for Absa Bank Uganda, who said agribusiness is a key sector for stimulating Uganda’s economic growth prospects and for a sustainable future.

“For us to support you we must understand your business,” he said, adding that “The Bank finds it easy to lend to groups that are easily monitored and have well-designed business plans and are well managed.”

 Kalifungwa advised that Ugandans need to produce and market what they import from other countries, which is also known as import substitution, as one of the measures of supporting the country’s economy.

He noted that the Uganda’s economic growth can be spurred by carefully designed partnerships between financing institutions, businesses and the government.

In their bid to support agribusiness, he revealed that Absa Bank has already committed an agriculture credit facility worth Shs100 billion and that the Bank is waiting for serious borrowers to utilize the funding.

He urged the stakeholders in the sector venture into agribusiness with a long term view of expansion and a growth plan, equipped with information to help them understand the business environment, weather patterns, and how they can overcome such challenges.

According to Kalifungwa, investors in the sector must appreciate the whole value chain starting from production up to marketing if they have to have the capacity to determine input costs, pricing and derive profitability from their ventures.

As one of the mechanisms to overcome the impasse, Kalifungwa said sector players should partner with financial institutions that are willing to understand the COVID-19 situation and offer affordable credit facilities to support businesses without choking their owners on debts.

Speaking on behalf of Bank of Uganda however, Rosette Bamwine, the head of credit and marketing – Agriculture Credit Facility (ACF), said doors are open for sector players who intend to access the funds because it is one way of promoting the government’s efforts switch Ugandans from the traditional practice of subsistence farming to embracing agriculture commercialization.

Ms. Bamwine said; “Micro, medium and large scale borrowers are benefiting from the facility,” urging financial institutions to appreciate that there is a need for Syndicate lending’ since it is the easiest way to reach the multitudes of sector borrowers in the country.

According to Bamwine, under the ACF, the government mainly focuses on the youth and women when it comes to supporting agribusiness, because most Ugandans fall within these two categories of people, yet many of them are eager and willing to work to improve their standards of living.

But she advised that if the project is to be carried out successfully, the government should put emphasis in the promotion of land rights, access to affordable and high-quality inputs, market access, partnerships, and skilling sector player within financial institutions, improving financial literacy for farmers and adoption of digital technology, plus investing in good storage facilities so as to reduces the losses incurred at the Farm Gate.

Conditions to Access ACF

Bamwine revealed that the ACF proprietors of agribusiness enterprises will access the loans at 12% interest per annum, with the maximum loan amount to a single borrower being Shs.2.1billion.

She revealed that by the end of June 30, 2020, Bank of Uganda had in liaison with several commercial banks extended credit facilities totaling to Shs520 billion as funding for 772 projects in various districts.

However, she advised borrowers to avoid relying entirely on lending and to ensure that they refund the money so as to give others an opportunity to benefit from the credit facility

She revealed that before extending the loan to sector players, the Bank puts emphasis on Group lending and assess the character of borrowers as some of the conditions for the ACF.

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