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Let us look beyond financing if we are to understand agriculture problems

Farmers face many problems that can’t just be solved by banks

Kampala, Uganda | THE INDEPENDENT |  In debating just access to loans to farmers alone, the country is missing key ingredients that make the agriculture sector unattractive to financiers.

This was the key message at the annual bankers’ conference at Serena hotel on Tuesday where banking executives discussed how they can be involved in giving more money to the sector. Discussions focused on how the sector can be de-risked for banks to lend to it

The bankers said the country needed to look at the entire eco-system – from loans, market access, governance, and productivity – which all lumped together make financial institutions fear the sector.

Many farmers lack access to extension services, they buy fake seeds and fertilizers from the market – making their chances of improving productivity low. And these problems can’t be solved by banks.

Patrick Mweheire, the Chairman of Uganda Bankers Association (UBA), which organised the conference, said it was time to stop having debate about just financing, but also other things that make them run away from it.

The figures on lending in the sector are particularly discouraging, Mweheire said. Some 18% of the Non-performing loans, that is the money whose recovery is in doubt, are in agriculture compared to an average of 10% in other sectors.

Consequently, this makes banks to naturally fear to lend the sector. Also, the sector where 68% of the population are in subsistence farming or where they farm for consumption without surplus for sale makes banks fear to go there.

Today, the sector receives just 12% of credit, dismally low if compared its 25% contribution to GDP.

Mweheire, who is also the executive director of Stanbic bank, said government, bankers, and civil society needed to ask why. “Two thirds of the of the population are still net food buyers meaning that there is low productivity,” he said. 

He added that through a combined effort, there is hope that more money could go into agriculture.

On his part, the Governor Bank of Uganda Emmanuel Tumusiime-Mutebile said he was uncomfortable that money given to agriculture sector is still expensive.

He said banks needed to focus where the many people are – and that is in the informal and small business sectors. He said they should design products that reach these people.

Jared Osoro, the director of the Kenya bankers Association, said without technology to increase production, smallholder farmers with acreage of less than 2 acres will remain a risk to the banks.

This means new ways to increase production for the small farmers must be invented to make them attractive to the financiers.

Uganda government has come up with many agriculture initiatives geared at helping farmers access money, including the agriculture credit fund and the capitalization of Uganda development Bank.

These don’t usually reach the smaller farmers – it is usually the bigger one who otherwise get funding from commercial banks.

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