DFCU introduces micro loan for farmers

DFCU bank is introducing a simpler loan portfolio to ease access to agricultural financing, the bank chairman Jimmy Mugerwa has said.

"Access to agricultural financing is still a big challenge," Mugerwa said at the official flag off to the Netherlands of the 2015 Best Farmers Award winners.

"We expect to introduce our new farmer Micro-Loan which is especially targeted to service individual commercial farmers.  Our main objective remains to increase the share of Agri-finance from 7% in 2013 to 20% of our total loan book in 2018.

"Many banks do not give out individual loans to farmers but give them out to groups because of the fear that an individual can easily default.  The loan targets individual farmers who are practicing agriculture commercially and making money out of it," explained Mugerwa.

DFCU, the Embassy of the Netherlands in Uganda, KLM airlines and Vision Group are the sponsors of the Best farmers competition for the second year running. The 13 winners for the 2015 competition leave for an all-expenses-paid tour of the Netherlands on Saturday June 11, 2016.

Mugerwa reiterated that access to finance is still a major challenge for the sector largely because of the perceived high risk associated with farming.

 Jimmy Mugerwa speaking before the farmers left for the Netherlands

"The lack of finance, both short and long term limits the ability to invest and procure productivity enhancing inputs, thereby contributing to low and uncertain output and food insecurity," Mugerwa explained.

Production enhancing farm inputs include tractors and value adding machinery. According to Moses Mugeni, from Cooper Motor Corporation (CMC), a good 2WD tractor costs around sh100m at the moment.  

But although agriculture finance access is still a challenge, there has been some progress on the front. Mugerwa explained that by the end of 2013, DFCU started to focus on the agriculture sector with support of Rabobank. Rabobank is also a Netherlands based bank. Among the key steps taken was the setting up of an agri-business unit in the bank.

"We know that setting up an Agribusiness unit within a bank takes time but we are in this for the long term," Mugerwa says. In 2015, DFCU managed to increase the Agri-portforlio with 40% to sh113bn. He said that the bank has developed new facilities for farmers groups which have been successfully rolled out in Northern and Eastern Uganda. Other DFCU farmers products include Farmer group account, Agri-Asset finance which helps farmers acquire farm machinery and Agr1-production loan where farmers are assisted to get processing equipment.