At least Shs 236bn has been disbursed to 378 farmers under the agriculture credit facility (ACF) since its inception eight years ago.
“The ACF has steadily improved since it was established in the year 2009,” says Bank of Uganda’s 2016/17 annual report.
The facility, run by BOU, is a government initiative aimed at availing farmers with affordable finance below the cost of funds on the open market. The interest rates under this facility are capped at 12 per cent per annum, lower than the average market rate of 20 per cent.
The money in the facility is contributed by government and participating financial institutions (PFI) that pledged to support it. The PFIs include commercial banks, micro deposit-taking institutions (MDIs), credit institutions (CIs) and Uganda Development Bank Limited (UDBL).
“The scheme’s operations are guided by a memorandum of understanding signed by all the stakeholders, which is reviewed annually in order to address the unique challenges facing the farmers in Uganda,” says the central bank.
According to BOU, as at end of June 2017, private financial institutions had grown from 11 in 2010 to 16. Of the disbursed money, according to the BOU 2016/17 report, government contributed Shs 117.34bn. The rest is contributed by financial institutions such as commercial banks, microfinance and credit institutions.
Ugandan farmers – who remain the poorest section of population – still use archaic methods of farming and their subsistence nature makes access to this facility even harder.
The loan applications under this facility are prepared and appraised by private financial institutions in line with their credit policy to ensure that only eligible projects are financed and submitted to BOU for reimbursement, the central bank says.
“Satisfactory projects are then financed/disbursed by the PFIs upfront and a request for reimbursement of the government contribution is then tendered to BOU,” says the report.
A single borrower can take up to Shs 2.1bn. The figure can be increased up to Shs 5bn on a case-by-case basis. The loan period is less than eight years. It has a grace period of up to three years.