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By Rtd Lt Moses Magufuri Mugisha Babyomera

In his speech during the 58th Independence Day celebrations day, the President said: “Farmers get exploited by commercial banks whose interest is a profit making without due regard to farming conditions such as gestation period, also on several occasions categorically he stated that he was misguided to close Uganda’s local financial institutions which is affecting our economy. 

This was a fundamental gesture towards the need for a hybrid bank that is responsive to agricultural and cooperative requirements and prioritizes farming conditions during consideration for a financial product. 

We are aware that the cabinet was directed to look into the revival of the Cooperative Bank. Before deeper progress with this agenda, we request that an effective consultative engagement of key stakeholders consisting of Inter-Religious Council and Other Cultural Leaders is conducted to deliberate key issues not limited to; governance and control, capitalization, and Ownership which are essential to avoid the repeat of circumstances that led to the 1999 closure of the Cooperative Bank Limited and liquidation concluded in July 2020.

An attempt to revive the old cooperative may not have a solid going concern and at this point, we have an opportunity to do things differently by totally transforming the concept of Agriculture and Cooperative Bank. This is an area we wholeheartedly side with the idea that the Promoters are championing.

Benchmark Outlook

Countries that have successfully implemented the agricultural and cooperative bank model include Germany, Canada, Vietnam, the Philippines, Bangladesh, China, Nigeria, and Kenya (Agricultural Finance Cooperation- AFC).

 This provides a persuasive baseline for Uganda to undertake this banking model for farmers and cooperators. 

At present, the supply-driven financing model provides an opportunity for building a robust people-centered financial delivery vehicle (Agriculture and Cooperative bank) to consolidate all the wealth creation funds to spur productivity and value addition in a sustainable manner.

Different government interventions

Numerous well-intentioned by the president of the Republic of Uganda but scattered public policies and interventions such as; Crop finance, PAPSCA, Entandikwa, NAADS, ACF, MSC funds, UWEP, PROFIRA, Youths Livelihood funds, Presidential Initiatives in Skilling and Value Addition, OWC, CAAIP, NUSAF Funds, Emyooga, etc., have not been able to effectively remedy the glaring agricultural financing gaps. 

We appreciate the government innovations for the above-mentioned interventions like Emyooga and PDM, however Parish Development Model (PDM) alone will not take Uganda into middle income as well as create 70 million jobs, but a collection of PDM+ Agro processing Facilities (APFs) + Rural Industrial Parks (RIPs) + Industrial Incubation Centre (RIICs) + Urban Markets (UMs) + Cultural and Creative Industries (CCIs). 

All these need a comprehensive and special financial approach which is not provided by the foreign-owned Commercial Banks, thus need for a single basket of Agriculture and Commercial Bank, spread with branches from Parish level across the country to push the citizenry towards commercial farming. 

What is the business value?

The Survey Report 2019/20 reveals a decline in the rural economy. This explains why despite all the different Government programs targeting the rural poor, there is increased poverty across the country, especially in the rural areas of Karamoja, Acholi, Bukedi, and Busoga sub-regions (UBOS Survey Report, 2019/20).

Furthermore, the UBOS UNHS 2019/20 report shows that 3.5 million households (39%) of Uganda’s population are still stuck in subsistence economy (Nkolera Kiida Kyonka) with 62% of these in subsistence agriculture. 

In order to address the above problems, one of the objectives of PDM includes; The Transformation from subsistence to monitory economy through increasing production for sustainable household income and livelihood. 

The harnessing and organization of agricultural activities into well-thought-out cooperative efforts will facilitate the pooling and directing resources into an efficient outfit for promotion and support of agricultural farms and businesses (producers, processors, and traders ) in a manner that increases and supports productivity,yields, and marketing. Efficient organization and financing of agricultural supply and value chains in the model proposed by the promoters.

Domestic revenue mobilisation

As of May 25, 2023 the Uganda Revenue Authority’s (URA) performance of sh21.5trn represented a 21% deficit and is projected to peak at 92.6% as of June 30, 2023.

That is an estimated value of sh25.1 trillion. Which if compared to the country’s budget of over sh52 trillion, compared to the current debt of 80 trillion. For this to improve, efficiency in revenue mobilization and increase in tax rates tend to be fronted.

This runs the risk of irking the taxpayers who in turn blame it on government.

Since agriculture employs over 80% of the youth, keeping them occupied in deliberately promoted Agriculture and Cooperative Bank to support farmers who are not supported by commercial banks will move the youth into a money economy that will attract increased income yield and so a better tax revenue mobilization and debt service ratio improved to make Uganda more sustainable with the debt levels.

Way forward

The specific understanding, interpretation, and operationalization of concepts are rooted in the conditions and interests that gave birth to the mental ideas that such concepts (like cooperative and agricultural finance) represent.

For the concepts to mutate and be turned into their physical equivalents for implementation, the thinking must be careful, logical, rigorous, and elaborate.

The temptations of ' easy way out’ and ‘quick fix’ (ekikula mangu kifa mangu) must be avoided. Differences might, and must, emerge but basics must be agreed upon.

Agricultural finance and cooperatives have not yet been properly conceptualized to fit and operateimpressively in the continuously evolving Uganda, nor has the idea of rural financial inclusion.

Fully indigenized, professionally-led/managed, business model cooperatives and banks would not only stimulate and spur savings but also attract and/or become partners for other commercial banks and MFIs.

Note that majority of finance providers in rural areas (ROSCAs, SACCOs, VSLAs, Gift-Giving Associations) are themselves kinds of cooperatives.

Given the above and other considerations not mentioned here, we would like to suggest as follows:

a) That the Government shelves the present drive to revive cooperatives in their original form to allow and support complete conceptualization and blossoming of a new hybrid approach that takes in to account indigenization of Agriculture and Cooperatives.

b) That all effort be directed to the processes that support NATURAL BIRTH and ORGANIC GROWTH of indigenous AGRICULTRAL AND COOPERATIVE BANK owned by Ugandan farmers/ cooperators.

c) That the government listens to the promoters of the idea in (b) above before further steps are taken to spend more public funds on other new outfits to adorn old failed interventions for improving and sustaining household incomes.

The above actions would have the following effects:

i. Allowing time for finer rethinking and proper conceptualization of rural development including agricultural finance and cooperatives in Uganda’s context, and bringing on board key stakeholders for positive collective perception of the same and eliminate resistance. 

ii. Allowing this innovation (Agriculture and Cooperative Bank) to be understood, introduced, and implemented by the farmers and cooperators while the government provides a legal framework as earlier requested by promoters, part funding (pooling all the other funds for developing household income);

iii. Government will have sufficient time to plan and take lead in running with this agenda as a government initiative in addressing problems of economic, social, and political contentious use of land as collateral, weak court and legal frameworks and processes, and weaknesses in rural infrastructure which are the apparent disincentives to rural financial inclusion;

iv. An indigenized innovation (Agriculture and Cooperative Bank) will be more acceptable and jealously guarded by the owners and managers, from the parish level across the country. Which in turn, removes the mind-set that government interventions are a gift; and

v. A well-thought-out approach will attract social and political acceptance of the citizens and instigate true nationalism and patriotism hence non-polarization of the country.

The writer is the National Chief Coordinator – Agriculture and Cooperative Bank Promoters