BoU asks govt to recapitalise Agriculture Credit Facility

A farmer sprays weeds with herbicide. Uganda has asked government to urgently recapitalise the Agricultural Facility Fund to address a funding gap resulting from an increase in approved projects. PHOTO/ FILE

What you need to know:

  • Since 2009, the Agricultural Credit Facility has extended more than Shs158.2b to about 103 agro processors engaged in value addition, boosting export promotion of agro-processed Ugandan made products, especially in the dairy, tea and grain milling sectors.

Uganda has asked government to urgently recapitalise the Agricultural Facility Fund to address a funding gap resulting from an increase in approved projects. 
In details contained in the Agricultural Credit Facility Progress Report for the period ended June 30, Bank of Uganda said the Facility had seen a 7.1 percent increase in loan applications, which during the period, had increased to 45 applications, stretching available financing by Shs21.11b. 

Therefore, the Central Bank noted: “Urgent recapitalisation of the Scheme [Agricultural Credit Facility] to refinance projects in the pipeline and additional applications for refinancing,” was necessary to avert a shortfall on committed projects. 
As at June 30, the Central Bank said it had Shs25.4b as cash at hand, which was lower than approved and pipeline projects totaling to Shs46.51b. Therefore, Bank of Uganda said, it  was faced with a financing deficit of Shs21.11b. 

“This, therefore, calls for recapitalisation of the scheme to address the funding gap and be able to meet refinancing requests from [participating financial institutions],” the Central Bank said. 
The report also noted a 58.7 percent increase in loan applications through the Agricultural Credit Facility, which during the period ended June 30, rose from 257 to 407.
Whereas the Central Bank indicated that loans through the Agricultural Credit Facility had increased, lending to the agricultural sector banks had declined by 41.3 percent with disbursed loans falling from Shs2.26 trillion as of March 2020 to Shs1.32 trillion in June.

In October 2009, government launched the Agricultural Credit Facility seeking to facilitating provision of medium and long term financing to projects engaged in agriculture and agro-processing. 
This sought to achieve the long-term agenda of commercialisation and value addition in the agricultural sector.
However, the Facility, according to Bank of Uganda, has since faced a number of challenges, among which include inadequate capitalisation, impact of Covid-19, which has had negative impact on agricultural production and agribusinesses and lengthy procedure for write-off of national performing loans.  

Extended credit         
Since 2009, the Agricultural Credit Facility has extended more than Shs158.2b to about 103 agro processors engaged in value addition, boosting export promotion of agro-processed Ugandan made products, especially in the dairy, tea and grain milling sectors. 
 

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