Civil society organizations have asked government to review an agreement it signed with commercial banks undertaking Agriculture credit facility (ACF) as this will help farmers access support from the financial institution.
They say the current arrangement where two parties( Bank of Uganda and commercial Banks) contributes 50:50% of the total agricultural loans has not yield any positive results when it comes to farmers accessing credit from participating banks.
Presenting key agriculture sector priorities for funding for financial year 2019/2020 to Members of Parliament on the Agriculture committee, Hellen Nakawoya Kasujja, a country board member at Participatory Ecological Land Use Management (PELUM UGANDA) said the current arrangement has discouraged farmers, especially small holder, from applying for loans from participating banks.
“Government needs to review the agreement so that it provides the highest ratio under the Agriculture Credit facility; the 50:50% arrangement is making the loans very expensive to the small holders. According to our survey, it is the commercial farmers that are benefiting from the agriculture scheme yet the intention was to support the peasants,” she told the legislators on January 25 at the Imperial Royal Hotel in Kampala.
According to the civil societies, government should consider increasing its allocation to ACF and reduce the ration to participating financial institutions to 70:30 % as is the case with Microfinance Deposit Taking Institutions (MDIs).
Statistics available indicates that Agriculture financing represents only 7% of commercial bank lending in Uganda, this shows that the distribution of credit is uneven yet the sector is the mainstay of the economy.
Despite initiatives by government to work with commercial banks to extend cheaper agriculture loans under the ACF, the facility has not worked for small and medium sized farmers because the loans are expensive.
Government of Uganda, through Bank of Uganda in partnership with financial Institutions such as commercial banks, MDIs and the Uganda Development Bank Ltd (UDBL) set up the ACF.
The facility was intended to provide medium and long term loans to projects engaged in agriculture and agro-processing on more favourable terms.
The scheme is administered by the Bank of Uganda (BoU), with provision for a maximum grace period of 3 years and the interest rate to the final borrower being at a maximum of 10% per annum. However, some participating institutions are said to have violated the arrangement, charging intended clients higher interest rates compare to the negotiated ones.
Apart from reviewing the agreement in the financial year 2019/2020, the activists also demand that government invest more resources towards providing water for agriculture production. This is contained in their recommendation paper to the Legislators on the committee of Agriculture.
The CSOs urge that the current changes in seasons, and climate change affects farmers across the country where some parts are experiencing unprecedented long dry spells and unevenly distributed rainfall.
“Ministry of Agriculture needs to invest in the construction of bigger water reservoirs and low cost systems at the districts to serve a wider population, alongside investing in low, simple and affordable technologies for farmer adoption” Reads part of the document recommendation.
Other actions which the farmers and the civil societies want government to address in the financial year 2019/2020 have to do with the limited financing of agriculture by the government which they said undermines performance when it comes to the sector’s total contribution to the country, GDP.
“Government needs to fund the sector as it was agreed on by the heads of states during the Malabo declaration. Poor funding of the sector limits Uganda from attaining some of the Sustainable Development Goals of the United Nations especially the goal on ending poverty, hunger and health where the agriculture sector plays big role towards their attainment,” said Mugoya Awali ogonzaki, the Secretary General of Uganda National Farmers Federation.
Responding to the CSOs during the meeting, the legislators promised to table their queries before the floor of parliament. The shadow Minister for Agriculture Animal Industry and Fisheries Francis Gonahasa said underfunding of the sector has multiplier effects on the social and economic transformation of the country.
“As Committee members, we are going to table the issues raised by farmers and non state actors to ensure that government responds to their demands especially when it comes to resource allocation to the sector,” he said.
He added that limited funding of the sector has made it very difficult for the farmers to adopt modern ways of farming in most parts of the country.
Ibanda Municipality (Ibanda District) Member of Parliament Tarsis Bishanga Rwaburindore urged farmers to form farming cooperatives that will help them access cheap credit facilities from commercial banks and other services from government.
BY SAMUEL NABWIISO