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Tuesday,September 17,2019 08:36 AM

Credit facility boosts agriculture

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Added 4th July 2019 11:32 PM

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More than 10 years ago, the Agricultural Credit Facility (ACF) was just an idea.

Even when it kicked off in 2009, applicants could hardly put together loan-worthy documents to acquire credit from the participating fi nancial institutions, according to Joanita Babumba, the deputy director of the facility, at Bank of Uganda.

To address that challenge, the central bank embarked on a sensitisation campaign. The effort has eventually paid off, according to implementers of the facility. They say considerable success has been registered in achieving the set objectives.

The ACF was set up in 2009, as a risk-sharing mechanism between the Government and the Participating Financial Institutions (PFIs). These include commercial banks, the Uganda Development Bank, Micro Deposit Taking Institutions (MDIs) and credit institutions The key objective of the scheme is to facilitate the provision of medium and long-term financing for projects engaged in agriculture and agroprocessing.

Good performance?

Simon Rutega, an advisor to the Financial Markets Development Committee at Bank of Uganda, says the ACF model of partnership between the Government and PFIs, is one of the best business models in terms of structure. Rutega says the model enables them to mobilise risk capital from different sources. “The fact that the Government provides the resources means that we can lower the interest rates and the diverse participating fi nancial institutions means that you have different distribution channels,” Rutega says.

Performance

Babumba describes the overall performance of facility as “encouraging during its 10 years of operation”. Her judgement was based on the number and value of loan applications that Bank of Uganda, the fund administrator, has received and processed over the 10-year period of implementation. CLICK HERE FOR MORE ON THIS STORY 

 

Stanbic vital in financing agric

Stanbic Bank plays a key funding role in Uganda’s agriculture sector Bank of Uganda recently recognised Stanbic Bank as the best performing commercial bank in disseminating the governmentfunded Agricultural Credit Facility.

The scheme’s operations started in October 2010, with the aim of providing medium and long-term fi nancing to projects engaged in agriculture and agro-processing, focusing on commercialisation and value addition.

Stanbic agribusiness fi nancing has played a key role in enhancing agriculture development in the country, through provision of working capital and term facilities.

This has had a pull effect of providing off-take of primary agriculture produce from farmers and enhanced the use of local raw materials in the agro-processing industries. This has also contributed to foreign exchange earnings through facilitation and financing of export of agriculture commodities.

This is in addition to creating employment along the agriculture value chain. Stanbic Bank supports the agricultural key sector, which accounts for over 24% of the Gross Domestic Product by providing loans, credit facilities and overdrafts to farmers, agroprocessors and aggregators, agriculture-related industries, co-operatives. CLICK HERE FOR MORE ON THIS STORY 

 

Who got what at ACF awards?


After 10 years of implementing the Agricultural Credit Facility (ACF), Bank of Uganda recently held the inaugural awards to recognise the efforts made by Participating Financial Institutions (PFIs) in the operationalisation, advancement and uptake of the ACF funds.

The ceremony was graced by top executives from the banking industry. While presiding over the function, the finance minister, Matia Kasaija, described it as the day ‘financial sector decided to recognise the men and women, as well as institutions and organisations that have devoted time to promoting agriculture’.

Stanbic Bank emerged the overall best performing PFI among commercial banks and Uganda Development. It was followed by dfcu Bank and Uganda Development Bank that emerged first and second runners up, respectively.

Post Bank took home five accolades for number of loan applications, number of loans disbursed as a percentage of the total number loans disbursed, number of loans disbursed to small borrowers, highest regional outreach and overall best performing microdeposit taking institution.

Meanwhile, Opportunity Bank emerged first runnerup in the Best Micro Finance Deposit Taking Institution category. Emmanuel Lubwama, Opportunity Bank’s agriculture finance manager, said the bank has positioned itself as an agricultural bank in Uganda. CLICK HERE FOR MORE ON THIS STORY 


Creditors to lessen risk in agriculture

Many a time, access to adequate finances has been fronted as the silver bullet for the transformation of the agricultural sector.

With this in mind, the Government established the Agricultural Credit Facility (ACF) and, according to Bank of Uganda, the fund’s administrator, the programme has registered success over the 10 years it has existed.

The Agricultural Credit Facility is a government programme set up in 2009 to provide medium and longterm financing to projects engaged in agriculture and agro processing through a risk-sharing mechanism between the Government and participating fi nancial institutions (PFIs).

PFIs include commercial banks, Uganda Development Bank Ltd (UDB), Micro Deposit-taking Institutions (MDIs) and credit institutions. However, fi nancial players argue that despite the risk-sharing mode employed in the facility, there remains a risk in extending the agricultural sector.

During a dinner to mark 10 years of ACF recently, they highlighted the need to holistically improve agriculture’s entire production and value chain. Holistically improving agriculture’s production and value chains, financial players say, shall entice the financial sector to extend more credit to the sector.

Wilbrod Owor, the executive director of the Uganda Bankers’ Association, says in the recent years, there has been vast interest in the agricultural sector, from educated youth. CLICK HERE  FOR MORE ON THIS STORY 

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