Despite efforts by the government to avail cheaper agricultural credit through the Agricultural Credit Facility (ACF), a few farmers have taken advantage of the facility to boost productivity, a senior banker has said.
Speaking to journalists in Kampala on Tuesday, Stanbic Bank managing director Philip Odera said limited sensitisation about the existence of the facility has led to low uptake of the credit funds.
“We partnered with government to offer subsidised lending to agriculture but the challenge has been limited communication about the availability of the funds to the sector,” he said. “We continue to encourage the Small Medium Enterprises dealing in agriculture to take advantage of this cheaper credit to grow the agricultural sector.”
However, Mr Moses Ogwal, a policy analyst at Private Sector Foundation Uganda, blames the low uptake on limited sensitisation and restrictive conditions for accessing the funds. “The nature of support is restrictive because it only supports value addition. We need to cover the whole agriculture sector. You can’t sensitise when you are dealing with a few people,” Mr Ogwal told the Daily Monitor yesterday. He, however, asked the government to consider increasing the funds so that it can reach a wider farming population and have a bigger impact.
Meanwhile, Mr Chris Newson, the chief executive officer Standard Bank for Africa, said Stanbic Bank Uganda remains the group’s engine in East Africa given its extensive branch network and profitability.
“We have made huge investments in the bank in Uganda and it is now a profitable institution, contributing immensely to the group’s profitability,” Mr Newson said. In Kenya, KCB, Equity and Cooperative Bank are the largest financial institutions in the country.
About the agricultural credit facility
Government, in partnership with commercial banks and Micro Deposit Taking Institutions, set up a Shs60 billion ACF in 2009 to provide medium and long term loans to projects engaged in agriculture and agro-processing on more favorable terms than they are usually available from commercial banks. The government contributes Shs30 billion - 50 per cent while the banks add another Shs30 billion to make a total of Shs60 billion.
Under the scheme which is administered by Bank of Uganda, farmers were to acquire agricultural loans at a low interest rate of 10 per cent per annum, with a maximum grace period of three years. According to the terms of the facility, the highest a farmer can borrow is Shs2.1 billion.