Equity Bank Uganda has launched the structural commodity finance loan, a financing solution aimed at supporting the growth of agribusinesses and smallholders in West Nile.
The structured commodity finance loan will allow agribusinesses to borrow against their agricultural inventory which can be used as collateral for security and repayment.
Agribusinesses stand to benefit from the loan facility by receiving financing to ensure that cash flow is available for maximum output; with the intention of repaying the loans once sale of the agricultural produce is complete.
Equity Bank Uganda’s head of retail, George Kato said such a financing solution will allow farmers to sustain customer demand and have access to new markets and customers.
“Agriculture remains a key sector in our economy and as Equity, we have chosen to invest in up scaling smallholder and medium holder farmers because they play a key role in the growth of the economy. With the new structured commodity financing, farmers and agribusiness SMEs can now effectively manage their liquidity and mitigate against risks related to the production, purchase and sale of farm outputs,” Kato noted.
Working with the farmers, the bank will isolate assets which have relatively predictable cash flows attached to them through price discovery and discounting. The agribusinesses will then use these to mitigate risk and secure affordable credit with flexible repayment terms.
With the new facility, customers will be able to access a loan amounts of between shs 30 million and shs 5 billion at competitive interest rates determined on a case-by-case basis and repayable within flexible periods as agreed during the application process.
The bank officials said that farmers and agribusiness SMEs looking to access the new financing solution will need to have an existing bank account while new customers will be required to open new accounts with the bank and provide previous banking history and statements.
All agribusiness SMEs will also have to provide proof of operation in the commercial agribusiness sector for at least one year and demonstrate ability to repay the loans as well as meet the other mandatory loan application requirements.
“Other than the loan, Equity Bank Uganda offers farmers various financing solutions including production loans which aims at improving crop and livestock production, asset finance loans for farm machinery such as tractors, marketing loans and processing loans which allows them to add value to their farm inputs and increase sales,” officials said.