Posted on April, 29, 2025 at 10:18 am
Bank of Uganda governor Dr Michael Atingi-Ego has revealed that the central bank successfully facilitated loans to nearly 3,000 of the country’s most at-risk farmers, most of whom managed to repay their loans in full.
Speaking at the launch of the Agricultural Finance Yearbook 2024 at Protea hotel, Dr Atingi-Ego highlighted the bank’s innovative approach under the Agricultural Credit Facility (ACF), which is administered by the central bank.
The annual publication, produced by Makerere University-based Economic Policy Research Centre (EPRC), explores financing challenges and opportunities in Uganda’s agricultural sector.
This year’s theme is “Achieving Sustainable Financing for Agriculture: Leveraging Wealth Creation Funds.”
Through the ACF’s block allocation model, the central bank disbursed Shs 18.6 billion to 2,767 farmers across the country. Notably, 34 per cent of the beneficiaries were women, and only one per cent of the total disbursed funds were classified as non-performing loans.
“Financing agriculture requires more than just capital. It needs innovative approaches that understand farmers’ constraints,” Atingi-Ego said.
The block allocation model takes a more flexible approach by accepting alternative forms of collateral such as chattel mortgages, conducting character and cashflow assessments, and issuing loans based on group membership, which helps mitigate risk.
Loans of up to Shs 20 million were also offered without the needfor traditional security. Since its inception in 2009, the ACF has disbursed over Shs 1 trillion through various commercial banks.
Despite its achievements, the facility has faced criticism for favouring farmers who may already have access to other financing options, leaving out the most vulnerable.
In response, Dr Atingi-Ego said the central bank is now realigning its targeting strategy to ensure that truly underserved farmers can benefit. He stressed the importance of learning from Uganda’s historical efforts to fund agriculture.
“Uganda’s history with agricultural financing reveals important lessons. In the 1980s, we saw the limitations of directed credit through public sector banks. The 1990s and 2000s brought targeted schemes like the Cotton Sub-sector Development Project and the Export Promotion Fund,” he said.
While well-intentioned, these schemes often struggled with: limited sustainability due to overreliance on subsidies that distorted the market; poor targeting with benefits failing to reach the most in-need and weak linkages with insufficient integration between financing and support services like agricultural extension.
Dr Sarah Ssewanyana, the executive director of the EPRC, commended the government of Uganda for its continued support of the yearbook. However, she emphasized the need for action: “While producing this book annually is commendable, it’s time for the government to begin implementing the recommendations contained within.”
Source: The Observer