Farmers demand BoU explanation for denial of agriculture loans

Farmers and traders from southwestern Uganda are up in arms against commercial banks, whom they accuse of denying them access to the Agricultural Credit Facility funds.

The farmers say the commercial banks instead lend them conventional money which comes with higher interest rates.

The Agricultural Credit Facility funds are meant to be loaned out at 12 percent per annum but according to the farmers, commercial banks choose to deny them this money but opt to borrow them theirs which is given at 25 percent per annum.

Farmers have now tasked the central bank to explain the motive behind this.

In 2009, government through the central bank, established the Agricultural Credit Financing with the main objective of supporting in the commercialisation of Agriculture.

The government later channeled this money into commercial banks, Micro-Deposit taking institutions, UDB and other credit institutions to provide loans to eligible farmers to boost their enterprises.

But while these funds were availed to these financial institutions, accessibility by farmers and traders remains a very big challenge.

"Accessing this money is not easy at all. When you go to these commercial banks it is easy to access the high interest loans compared to those in the Agriculture Credit financing," said Simon Kwikiriza, the head of community transformation Ankore Diocese.

"Loans officers will bluntly tell you this loan takes longer processes."

 

According to the central Bank, farmers are supposed to access loans from the Agricultural Credit Financing at 12 percent per annum but farmers are allegedly denied this money but instead given bank money which is loaned at 25 percent per annum.

This has since rendered the Agricultural Credit Facility funds dormant.

"To be honest with you 90 percent of the farmers don't know it (Agriculture Credit financing) but when they were presenting the budget, they said this money is still there, that it was not utilized and surprisingly they keep on allocating more money each financial year into the same and still it remains unutilised," Ambrose Ganshanga, the leader of Hope Inclusive Development Centre, said.

Addressing farmers and traders in a post budget dialogue organized by the Public Sector Foundation Uganda in Mbarara, Prossy Nakawuka, senior banking officer agriculture and other credit schemes department in the central bank, said it's true some farmers are denied access to this money having failed to produce records that would qualify them to access this money.

She advised them to always apply for this money when they're not on hurry.

"Yes it's true some farmers are denied access to this money simply because they want money like now now even some come applying for an agricultural loan without binding records," Ms Nakawuka  said.

"We don't just give basing on words but records. If you're on hurry please don't apply for this (ACF) money."

Similarly, traders also questioned the central bank officials to explain to them why access to small businesses recovery funds is too difficult yet government put that money to help boost businesses that were affected by COVID-19.

In the same engagement, traders also raised many issues among which included increasing costs of business name reservations by URSB, corruption of Public funds and failure by URA to widen the tax base.

"We always wonder why parliament allocates huge sums of money in the budget every financial yeah but you can hardly see it on ground. We need to find to deeply investigate and find out where the loop holes are," Mr Sezi Mwijuka, chairman Mbarara City traders.

Traders also tasked the tax body URA to widen then tax base and stop squeezing a few people to pay the taxes.

"As Public Sector Foundation Uganda we have taken note of every issue raised by the farmers and traders through this dialogue. We promise that we shall engage relevant government departments to ensure we find out lasting solutions," Ms Jackline Umwiza, the PSFU western regional manager, said.