Agriculture loans can ease inflation

Sep 06, 2013

The availability of more loans designed to finance activities along the agricultural production, processing and marketing value chain can turn out to be a secret weapon to tackle food inflation in Uganda, a banker has advised.Speaking earlier in the week at the opening of the bank’s Jinja Road bran

By Billy Rwothungeyo

The availability of more loans designed to finance activities along the agricultural production, processing and marketing value chain can turn out to be a secret weapon to tackle food inflation in Uganda, a banker has advised.

“Yes, it is a good thing for more commercial banks to support the farmers by offering innovative agricultural loans. This will enable farmers to produce more so that food inflation can come down,” A.R Kalan, the managing director of Crane Bank said.

He said this at the opening of the bank’s 33rd branch on Luwum Street in Kampala on Wednesday.

Speaking earlier in the week at the opening of the bank’s Jinja Road branch, Kalan said such loans would increase food production by enabling farmers to embrace modern trends like irrigation, use of fertilisers and mechanisation.

Of the 24 commercial banks in Uganda, only a handful have agriculture loans products. Though Uganda is touted as a food basket in the region, production of food is still below par and this worsens even further during dry spells, leading to price hikes.

The rise in food prices heavily influenced the rise of headline inflation for the month of August to 7.3% from 5.1% the previous month.

The annual food crops inflation went up by to 13% for August, from 0.3% recorded in July according to the Uganda Bureau of Statistics.

Increases in the prices of major food items like matooke, sweet potatoes, tomatoes, egg plants, cabbage, beans and milk were recorded in most centres across the country.

Consequently, the central back swiftly reacted by upping the benchmark Central Bank Rate rate from 11% to 12% to check inflation expectations.

 

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