Most farmers accessing funds informally- report

Caritas Uganda’s Francis Ndamira calls for partnership between government and the civil society to promote agriculture. Listening in is Ministry of Finance’s Maxwell Adea. Photo by S. Wandera

Kampala- Six out of 10 small scale farmers depend on money lenders (loan sharks) and other informal sources of funding, a report presented by a group of civil society organisations claims.

The problem with such unregulated financing, according to Sophie Kyagulanyi, the programme manager of Forum for Women in Democracy- a gender-based civil society organisation, is that it exposes the farmers to unfavourable terms, almost all the time.

Accessing finances
Presenting a paper on agricultural financing at a meeting yesterday in Kampala, Ms Kyagulanyi said while quoting figures generated by the Uganda National Bureau of Statistics (Ubos), 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.

And that, according to Ms Kyagulanyi, explains why agriculture, despite the government saying it is the backbone of the economy, is not contributing as much as it should in the development of the country. With formal financial institution interests rates hovering at over 20 per cents, 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 them money lenders interest’s rates is 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 formal financial institutions.
It also emerged that beside the challenges surrounding access to agricultural financing, those who are able to access it are not given enough repayment period let alone exorbitant rates being imposed on them.

Ms Federica Nshemereirwe, the senior agricultural officer at the Ministry of Agriculture, emphasised the need for coordination.