Tuesday September 2 2014

Analysts cast doubt on latest agriculture financing intervention


Early last week, the European Union (EU) announced a trial equity fund of 30m euro to finance small and medium sized farmers to increase food production and household incomes.

The argument at the Tuesday 26 event where the head of EU delegation in Uganda, Amb Kristian Schmidt was present be that farms that will access the money should be worth Euro200, 000 to 2m and a maximum of 35 per cent of the target companies’ investment and equity.

The fund, premised on a profit-sharing, equity participation International Fund for Agriculture Development IFAD) who are the managers of the fund and the farmers to replace interest on the fund, EU said 25 to 30 farms are being targeted.

The set requirements experts say makes a few farmers who are already rich (according to Ugandan standards) to benefit and yet to break the poverty circle, the poorer farmers should be equipped with skills and have capital to fund farming activities.

The target of the fund is to boost food production and increase incomes of the small and medium sized farmers which Mr Schmidt says was a realization of need to boost the sector that accounts for over 47 per cent of export revenues, employing 73 per cent of the population and contributing 40 per cent of manufacturing sector.

Professor Augustus Nuwagaba, an economist and lecturer at Makerere University says the bigger limitations that the fund should be addressing are those of the rural poor farmers who are the majority.

He says although funding farms above Euro200, 000 is welcome and will help farmers add value on produce hence attractive prices and create jobs, the government and other financiers should look at an alternative funding for farmers whose farms’ worth are less Euro200, 000.

“The farms that are worth Euro200, 000 are few and the fund may not reach the poor farmers,” Prof Nuwagaba said.

“An alternative funding say in Microfinances should be able to offer cheap loans with long repayment periods but EU intervention is good to help in value addition,” he adds.

The Microfinance and Saccos which are not currently regulated cannot be the best referral for farmers to get loans in a sector that is full of uncertainties.

Mr Mathias Kasamba, the chairperson parliamentary Committee on Agriculture, Animal Industry and Fisheries says until government regulate Saccos or start an agriculture bank, farmers will continue to face the limitations in accessing of capital.

“We have grappled with agriculture finance. We have tried Saccos and the biggest challenge they are not regulated….the ultimatum goal is opening an agricultural bank where a farmer of whatever size can openly enter…and be able to access the financing. We thank though the intervention of EU,” Mr Kasamba said

Mr Alessandro Marini, the IFAD country representative said the management of the fund will entail registration of a company with a board of investors mainly private sectors players that will assess which farmer qualifies for the fund.

He adds that institutions will also qualify to access the funding provided they meant the criteria. The target farms, he says are those with characteristics of strong entrepreneur skills, smallholder farmers that link customers or suppliers like out growers schemes, processors and businesses that have good finance records and signs of growth.

Finance minister, Maria Kiwanuka maintains her opportunism for this equity fund and urges that, it has “potential of ending unemployment, increasing exports, improving household incomes and lifting general standard of living”.

She says “We see agribusiness not just a case of more money but more money with skills development and we appreciate that EU has seen that. We see the need for financing viable projects.”