BoU tasks banks on fight against climate change as aBi commits more funds

The Bank of Uganda Deputy governor, Dr,Michael Atingi-Ego has tasked commercial banks  to commit to immediate action towards aligning their business models with global climate goals.

“The Bou is encouraging the banking sector to review its business models by incorporating initiatives that address economic challenges to create value for the communities that they serve. This will be achieved through holistically embedding environmental sustainability in their core business strategies. Banks will need to leverage emerging technologies to channel resources into creating decent jobs and sustainable economic opportunities particularly for the underserved and vulnerable population segments while improving their operational efficiency,” Dr. Atingi-Ego said.

He was on Tuesday speaking during a function to launch the green taxonomy and green finance fund in which the Agricultural Business Initiative (aBi) has committed another shs120 billion to agribusinesses to help in the fight against climate change.

The BoU deputy governor said that despite employing over 70% of Uganda’s labour force, the agricultural sector has one of those most hit by climate change, noting that something ought to be done to avert the crisis.

He noted that BoU will now require the banking sector to review its business models by strengthening links between the preservation of the natural environment including green financing which supports agriculture and risk adjusted returns by their shareholders.

“This will be achieved holistically through embedding environment sustainability in their business principles. We aim to integrate climate risk management in micro prudential and risk based supervision as well as the monetary policy framework.  This is because climate change directly affects the delivery of our mandate. Extreme weather forces price volatility and exposes the commercial banks’ balance sheets to risks such as the potential default of agricultural industry borrowers,” Anti-Ego said.

He noted that climate change also directly affects exports which are forex earners to the country and consequently diminishes the country’s earnings and putting pressure on the exchange rate.

To avert this, the deputy governor for the BoU said it is high time commercial banks are involved in the fight against climate change through tailor-made initiatives.

The fund

According to the aBi CEO, Mona Muguma-Ssebuliba, the shs120 billion fund will help support agribusinesses to be more resilient, mitigation to the effects of climate change and biodiversity conservation.

“It is important we generally look after the earth as we go about our business. This green taxonomy and green finance not only stopping at famers but also extending to manufacturing, construction, transmission, energy generation, ICT and many others so that you find it useful and not just limited to agribusiness sector.  The green finance fund will have three key products including a line of credit worth shs120 billion. This aimed at supporting the financial service sector and agribusiness sector in dealing with climate change through adaptation, mitigation and biodiversity conservation,” Muguma-Ssebuliba said.

She explained that the funds have been channeled through commercial banks and other financial institutions like saccos where agribusinesses can get credit to help deal with effects of climate change.

The aBi Finance CEO said the green finance fund aims at increasing access and uptake of appropriate and sustainable financial services for green agribusiness investments of  SMEs and smallholder farmers in Uganda .

She noted that the agribusinesses will get credit between shs500 million and shs38 billion each for a period of up to 10 years and a grace period of up to 12 months.

 

Reader's Comments

RELATED ARTICLES

LATEST STORIES

Schools in Gulu City  report 398 red eye cases
health By Joseph Omagor
6 hours ago
Schools in Gulu City report 398 red eye cases
Gen Muhoozi addresses troop promotions, military strategy
news By BillClinton Nuwahereza
6 hours ago
Gen Muhoozi addresses troop promotions, military strategy
Mityana Payroll Mired in Irregularities
news By Sam Ibanda Mugabi
16 hours ago
Mityana Payroll Mired in Irregularities