Farmers want government to protect them from illicit money lenders
Posted Monday, December 9 2013 at 00:00
Most of the money lenders’ interest rates are as high as 100 per cent.
Mbale - Farmers want government to enact a law to protect them from money lenders and other informal sources of funding they say are making them poorer.
A civil society group report released recently indicates that six out of 10 small scale farmers depend on semi informal sources risking being charged above 100 per cent interest rate per annum.
Call for protection
“A number of our fellow farmers have lost property to money lenders. We need government intervention now. Parliament should pass a law to protect us (farmers) from these ‘thieves’,” Mr George Kisule, a farmer from Luuka District said.
Mr Kisule was among farmers, who are members of the civil society and bankers from six districts from eastern Uganda attending a regional agriculture financing and credit access information and research dissemination symposium in Mbale town on Thursday.
Ms Grace Isabirye, a rice farmer from Luuka District, believes that reduction on taxation in the banking sector could help boost their production.
“Government should channel the funds through sub-county groups to avoid commercial bank bureaucracy or else reduce interbank lending rates and taxation on commercial banks to reduce interest rates,” he said.
The trouble with such unregulated financing, according to Betty Aguti, a policy and advocacy officer, Caritas Uganda (a Catholic church-based civil society organisation), is that it exposes the farmers to unfavourable conditions, almost all the time.
Ms Aguti says figures generated by the Uganda National Bureau of Statistics show that 61 per cent of small scale farmers, who make 80 per cent of the total farmers in the country, access finances from informal sources to help them produce.
“And 29 per cent of the same farmers (at least three out of 10 small scale farmers) get their funding from semi informal sources while only 10 per cent ( one out of ten) access agricultural funding from the formal financial institutions,” she said.
With formal financial institution interests rate floating at more than 20 per cent, small scale holder farmers tend to turn to loan sharks money lenders who are prepared to bail them out although at a punitive cost.
Most of the money lenders’ interest rates are as high as 100 per cent but because of its informal nature of operations—less stringent, farmers continue to seek for their services as opposed to the formal financial institutions.
Eastern Archdiocesan Development Network Iganga area manager Godfrey Muhwezi says they have so far trained 2,178 farmers on skills to help them not to fall in the trap of loan sharks.