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Banks devise ways of increasing lending to agriculture

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A teller counts money in a bank. Bankers have started the conversation about lending more to the agriculture sector. the share of lending to agriculture as a percentage of total private sector credit has more than doubled from 5.2 per cent in 2009 to 12 .9 per cent in 2019. PHOTO BY ERONIE KAMUKAMA 

By Martin Luther Oketch

Agriculture can offer an opportunity for inclusive, economic growth, particularly in developing countries such as Uganda. With sufficient financing for sustainable and climate-smart production systems, experts believe that the sector can unlock economic potential.

In response to the above benefits, commercial banks in Uganda are positioning themselves to use an ecosystem to increase lending to the agricultural sector in the next five years based on their aspiration of raising lending to agriculture to 20 per cent from the current 12 per cent.

Agriculture lending
The last decade has seen a remarkable improvement in lending to agriculture. Private sector credit to this sector has increased in nominal terms from Shs241.7 billion in 2009 to over Shs1.6 trillion in early 2019. Currently, the share of lending to agriculture as a percentage of total private sector credit has more than doubled from 5.2 per cent in 2009 to 12 .9 per cent in 2019

The agriculture ecosystem is an open system, whereby continuous human intervention is needed for the maintenance of equilibrium with the aim of maximising the production provided by a few domesticated plants (crops) and animal species.

In an interview with Prosper Magazine last week, the chairman Uganda Bankers Association (UBA) who is also the chief executive of Stanbic Bank Uganda, Mr Patrick Mweheire, said by increasing lending to agriculture, banks will aggregate farmers in groups depending on what crops they produce such as barley, cocoa, coffee and maize among other crops grown in Uganda.

“We have scaled up financing (lending) in specific crops grown by the farmers under the ecosystem,” he explained.

Mr Mweheire said partnerships such as the Agriculture Credit Facility (ACF) at Bank of Uganda and other initiatives will help in de-risking agriculture.
He said as Stanbic bank Uganda they have financed the entire value chains with Nile Breweries.

Mr Mweheire challenged bankers to rethink about financing agriculture.
“Bankers and financers must start seeing agriculture from another pair of lenses. We must invest in understanding the dynamic and cycles in agriculture and structure appropriate financing models that suit agriculture and its value chains,” he said.

Agriculture contributes 25 per cent of the Gross Domestic Product (GDP) of Uganda, and banks’ want to match lending to agriculture with the same level it contributes to GDP.

Asked how Stanbic Bank is doing regarding lending to agriculture, Mr Mweheire said: “At stanbic our lending to agriculture is already at 25 per cent.”
Bankers aspire to increase lending to agriculture from the current 12 per cent to 20 per cent in the next four to five years.

The executive director of Uganda Bankers Association, Mr Wilbrod Owor, said, “It is a change that will take some time.”
The Rabobank Group operates in 48 countries, providing clients in every market with industry expertise, extensive experience, innovative resources – and deep local market and sector knowledge.

Agricultural financier 
Rabobank is rooted in the Netherlands and has a large network in the agricultural business, research and education sectors.

Rabobank — a global leader in food and agriculture financing — has played an important role in developing Dutch agriculture and horticulture, both businesses in the Netherlands.

Rabobank was founded in the 1890s by farmers as a small cooperative of banks serving their rural communities. The cooperative model was designed to provide a fair and reliable source of credit to local customers through a system of shared liabilities, pooled resources and reservation of profits.
Rabobank expanded its business scope and geographic presence throughout the 20th century, adding a broader range of banking and financial services to meet the needs of its customers in the Netherlands and internationally.

Here in Uganda, Rabobank is supporting agriculture through the Netherlands Embassy. In dfcu bank, it is giving technical assistance on issues related agriculture financing.
Ms Marianne Schoemaker, the managing director, Rabo Partnerships, explained how banks can de-risk agriculture to promote decent youth employment and inclusive growth.

In an interview with Prosper Magazine, on how banks in Uganda can increase their lending to agriculture, Ms Marianne said banks should understand the business of their clients.

“They (banks) need to have an understanding of the business that they are servicing well; for instance, fish supplier trend, logistic inputs for the case of crops and the risks,” she said.

Ms Marinne said government needs the knowledge on how to blend financing for that particular product.
Sharing her knowledge on how Rabobank has operated effectively in agriculture financing, Ms Marianne said their operation is based on knowledge, network and finance.

“These three are crucial because it provides the insights on our operational models,” she
Marianne added: “Use the knowledge and come up with the financing solutions for clients. You need a network that provides information to you whether to provide financial support or technical assistance,” she explained.

Agriculture Insurance
During the Financial year 2016/17, government of Uganda established the Uganda Agriculture Insurance Scheme (UAIS) as a pilot project whose objective is cushion farmers from risks associated with losses from natural disasters while attracting financing to agriculture.

Agriculture Insurance encourages commercial banks to lend to the agriculture sector given that the risks associated with agriculture are mitigated through appropriate insurance covers, improving access to agriculture loans.

The scheme provides an insurance cover for crops and livestock, for both small and large-scale farmers. Under the scheme, government provides premium subsidy funds, and in collaboration with industry players also undertakes publicity, sensitisation and training of farmers.

The Insurance Regulatory Authority of Uganda (IRA) provides the regulatory oversight and quality control, Bank of Uganda on the other hand, manages the drawdown on UAIS Account, while monitoring and evaluation of the scheme is done by the UAIS Technical Working Committee.

Started on July 1, 2016 with Shs5 billion, the Uganda Agricultural Insurance Scheme (UAIS) is a Public Partnership arrangement, which covers five years.

The Acting Commissioner Financial Services in the Ministry of Finance, Mr Ira Kirungi John Byaruhanga, said the number of farmers accessing the agriculture insurance scheme has grown.

“In the last one year, we have seen uptake in this scheme increasing. 77,000 farmers are accessing the funds through the scheme,” he said.

In developing Uganda’s agricultural sector to the desired level, which attracts high credit services from the commercial banks, the governor Bank of Uganda, Mr Emmanuel Tumusiime Mutebile, said potential areas of further investment for government and the financial sector include roads, cold storage, transport, support for farmer organisations, agricultural extension and out grower schemes.

“Bank of Uganda will continue working with government and commercial banks in promoting affordable agricultural finance through the Agricultural Credit Facility, which we encourage all eligible borrowers to take advantage of,” he said.

Agriculture Credit Facility
The Agriculture Credit Facility (ACF) cumulatively disbursed Shs332 billion by 31st March, 2019, to finance 551 eligible projects. This enabled borrowers to establish large capacity agro-processing facilities, expand grain trade and investment in warehousing and expanding farm infrastructure.

However, 15 loans valued at Shs9.4b financed under the ACF were due for write off as at March 31, 2019.

The Netherlands’ Ambassador to Uganda, Henk Jan Bakker said di-risking agriculture finance is of critical importance to the development of Uganda’s economy. Ambassador Henk observed that commercial interest rates are still high. “Money cost is very expensive in Africa as a whole,” he said
Going forward, Ambassador Henk advised that to develop Uganda’s agriculture system government, donors and private sector have a role.

INVESTMENT AREAS
In developing Uganda’s agricultural sector to the desired level, which attracts high credit services from the commercial banks, Mr Mutebile said potential areas of further investment for government and the financial sector include roads, cold storage, transport, support for farmer organisations, agricultural extension, and out-grower schemes.
Mr Mutebile said it is also necessary to address information asymmetries, for example, by matchmaking international firms and local suppliers.
“Only through boosting agricultural development through inclusive rural-urban links will we effectively harness the agriculture sector as a dominant source of employment. I applaud the UBA for rising to this challenge and call upon Government to join the bankers in the modernization of agriculture for job-creation and inclusive economic growth,” he said.

De-risking agriculture
Several other initiatives have been introduced to harness opportunities while combatting obstacles including de-risking lending to the agricultural sector with schemes such as the ACF at Bank of Uganda, the agri-business development & guarantee scheme at aBi Trust, the Ugandan Agricultural Insurance Scheme, farmer skills empowerment programmes to enable them to undertake agriculture as a business.

More recently, there have been increased points of access to financial services through agent banking and use of other digital infrastructure to speed up financial payments and money flows through technology.

Without incentives, farmers are limited in their ability to invest the time and capital to change agricultural practices and overcome technical, cultural or financial barriers to sustainable production.

These incentives encourage farmers to protect and deliver more services through better management of crops, livestock, forest and fisheries, and conservation of endangered species and protected.

Original Source: Daily Monitor

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FARM NEWS

Coffee Leaf Rust disease hits Mbale region farmers

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Mbale, Uganda | Coffee farmers from Bulambuli and Sironko districts are counting their losses after being attacked by coffee leaf rust disease. The disease, caused by the rust fungus Hemileia vastatrix, can reduce coffee production by between 30% to 50%.

The most affected sub-counties in Sironko include Buhugu, Masaba, Busulani, Bumasifwa, Bumalimba, and others. In Bulambuli, the hardest-hit areas are Lusha, Bulugeni Town Council, Buginyanya, and Kamu, among others.

In an exclusive interview with our reporter, Francis Nabugodi, the Sironko District Agricultural Officer, spoke about the devastating effects on farmers. “This disease has negatively impacted farmers in terms of production, and since it’s coffee season, they are going to make losses,” Nabugodi said.

He added that he had instructed extension workers to start massive sensitization campaigns in the six affected sub-counties about preventive measures, such as spraying, to curb the spread of the disease.

Nabugodi also urged the Ministry of Agriculture, Fisheries, and Animal Husbandry to supply the district with chemicals so they can distribute them to farmers, as many cannot afford to buy them.

Julius Sagaiti, the LCIII Chairperson of Lusha Sub-County in Bulambuli District, stated that his sub-county is the worst affected, with over 100 farmers having all their gardens hit by the disease. He called for urgent action from Bulambuli district leaders, warning that the situation would have severe consequences for farmers.

Timothy Wegoye and Suzan Nanduga, both affected coffee farmers from Bukisa, the worst-affected sub-county, shared their concerns. “The majority of farmers are ignorant about preventive measures and do not know the chemicals for spraying,” they said, urging extension workers to use the media to sensitize them.

Original Source: URN Via The Independent

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FARM NEWS

Drought ruining Kasese farmers’ livelihoods

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Along Bwera-Mpondwe road, in Kasese district, farmers till the land, with every hoe raising more dust than dirt, a testament of how hard the sun has scorched the ground. Located at the slopes of the Rwenzori Mountains, the low altitude leads to high temperatures as the district also sits on the Equator. In January this year, the average temperatures were 25.1 °C

Gideon Bwambale walks through drying maize garden.

Today, the temperature is 28.6 °C. The most affected areas are low-lying sub-counties like Kahokya, Nyakatonzi and Muhokya.

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FARM NEWS

Farmers count losses as dry spell scorches maize gardens

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Many farmers say they had borrowed money from banks and Saccos

During the first planting season, which usually kicks off in March, many farmers had hoped for a bumper harvest.

However, the unrelenting dry spell in some parts of the country has withered the crops, resulting in poor food harvests mainly maize and beans.

Although some districts received rains last week, many farmers, especially those growing maize and groundnuts, are counting losses after several acres of the crops got scorched by sunshine.

In the central region, the most affected are farmers in the districts of Nakasongola, Kiboga, Kayunga, Mubende, Kyankwanzi, Gomba, and parts of Rakai.

In Nakasongola District, the most affected sub-counties include; Nabiswera, Wabinyonyi, Kalungi, and Kalongo where farmers now stare at eminent hunger and lost cash invested in their respective gardens.

In Mulonzi Parish, Nabiswera Sub-county, Mr Simon Male has lost 35 acres of maize.

“I grow maize on a commercial scale, but my entire garden is scorched by the hot sun. I have lost the hope of harvesting any grains from this particular season. I did not anticipate the hot sun. Part of the money invested in my agriculture projects is from the loans,” he says.

Mr Ali Kisekka, a maize farmer and chairperson of Kabulasoke Sub-county in Gomba District, says all his 30-acre maize plantation withered two months after germination (between March and April).

“I spent money on renting the land, labour, purchase of seeds, and other inputs, amounting to Shs6m. Unfortunately, the rain did not come in sufficient amounts,” he says.

“Almost 50 percent of farmers in my sub-county are counting losses. We are now praying for the next season,” he adds.

Irreparable damage

Mr Emma Kintu, another farmer in Kabulasoke, says: “The damage has already been caused and we cannot save anything even if we get rain now, we are going to cut the maize and use it for mulching.”

Mr Samuel Muwata, a produce dealer in Kampala’s Kisenyi suburb, says the poor maize harvest may cause a spike in maize flour prices as was the case last year.

“The demand [for maize ] is increasingly high, and if there is no importation of maize from countries like Tanzania, there will be shortage which will cause prices to increase  possibly  in August or at the beginning of September when schools open for Third Term,” he says.

Currently, a kilo of maize grains costs between Shs800 and Shs1000, down from Shs500 a month ago while maize flour (corn) is between Shs1,800 and Shs2,000, down from Shs1,500.

Mr Augustine Wafula, a farmer in Busabana Village, Lunyo Sub-county, Busia District, says he only harvested four acres of maize from his five-acre garden. “I got a bank loan to plant five acres of maize, but ended up harvesting only four bags,” he says.

Mr Wafula’s loss has dealt a huge blow to his marketing prospects, especially in Kenya, which is a good destination for maize from Sofia and Marachi markets in Busia Municipality.

Because of the relatively good market for cereals in Kenya, several Ugandans were forced to rent land to plant maize. Unfortunately, the weather has left most of them counting losses.

Mr Anatoli Kizza, a farmer in Kiyindi Village, Buikwe District, says he used to supply schools with maize grains, but since the beginning of the year, he had not planted any because of the dry season.

“I tried to purchase the maize grains locally, but they could not reach the kilogrammes desired by the schools,” Mr Kizza says, adding that the dry spell is a result of abuse of the environment, including deforestation and encroachment on wetlands.

In Bugiri District, Mr Imani Mumbya, a groundnuts farmer in Isegero Village, Nabukalu Town Council, says he harvested nothing after planting the crop in his five-acre garden last season [August to December 2023] due to the unpredictable weather pattern, which was characterised by scorching sunshine.

Abrupt weather change

Mr Mumbya says following the first rains in January, he rushed to plant groundnuts. However, the rains abruptly stopped before the seeds barely sprouted.

He adds that because few seedlings sprouted, he cleared the garden in preparation for the second rains in April, which lasted until the end of May and helped the seedlings to sprout.

“But before the groundnuts could spend their entire 86-day period to mature, another drought came which prevented me from harvesting,” Mr Mumbya further explains, describing it as “the worst season during the 10 years he has been a farmer”. Mr Aloysious Kizito, a renowned farmer in Bbugo Village, Kyotera District, says maize harvests in the area have been too low as compared to last season which has reduced farmers’ expected returns on invested funds.

Although this area previously received heavy rains, Mr Kizito believes it was not evenly spread throughout the whole season, which led to poor harvests.

“We received heavy rains for two and half months yet most seasonal crops take three to four months to completely mature,” he says.

The most affected seasonal crops are maize, soya beans, peas, and Gnuts, which is likely to result in food shortages in the coming months.

Mr Abdul Birungi, a cereal farmer in Lubumba Village, Kyotera District, says although he reaped seven tonnes of maize last season from his seven-acre garden, this season he got only one tonne .

He attributes the poor harvests to what he describes as misleading messages issued by experts from the Uganda National Meteorological Authority (UNMA)   which warned farmers against planting crops in January and early February.

“I wanted to plant in early January, but changed my mind upon getting their [UNMA] advice, I feel puzzled because those that didn’t go with their advice in our area at least got good harvests,” he says.

But Ms Lillian Nkwenge, the UNMA principal public relations officer, says many farmers always fail to follow their forecasts as issued and end up blaming the Authority.

“The country is not expected to have major changes in the usual rainfall patterns this year. Most parts of Uganda normally have two rainfall seasons separated by dry season. So  , we hope to get the second wet season in early September,’’ she says.

Weighing options

In Teso Sub-region where farmers have for decades relied on rain-fed farming, they have started having a discourse on how to wholly revert to livestock or continue to depend on crop farming which continues to be affected by the erratic rainfall pattern.

The call to revert to livestock farming comes amid yet another failed crop harvest.

Mr John William Ejiet, the Kapelebyong District production officer, says when farms were at a critical stage of flowering, the drought again set in, leaving hundreds of farmers dejected.

 He says now is the time for farners to invest in micro-scale irrigation.

“Whereas there are small grants for small irrigation from the government for farmers, the rate of adoption is still low yet we are at a critical moment when we need to adapt to new farming techniques other than the rain-fed farming which is no longer reliable,”   Mr Ejiet says

 Ms Joyce Akwii, a resident of Omodoi in Ocokican Sub-county, Soroti District, says she invested more than Shs3m in crop farming but got less than Shs500,000.

 “I have resolved that come next year, my five acres of land that I have been using for crop farming will be turned into a goat and sheep farm,” Ms Akwii explains.

Last resort

Mr Mike Odongo, the chairperson of Ngora District, says for farmers to have a win -win situation, it is high time that they invested in both livestock and crop farming,.

“The goats and sheep can scavenge in the harsh environment,” Mr Odongo reasons.

 He says the once good environment that defined Teso has heavily been depleted and it is one of the reasons for the altered rainfall patterns.

“There is a need for soul searching among people of Teso, and deliberately focus on a greening campaign like we have started in Ngora with over 20,000 trees donated by Roofings Group and Centenary Bank. This is one of the mechanisms that may enable farmers to manage to retain water in the soil,” the district chairperson advises.

Mr Stephen Ochola, the Serere District chairperson, says the ultimate answers lie in livestock farming.

“If you can’t find Shs10m in growing cereal crops, you can find that in only three fattened animals and you will readily be able to have your children at university,” he says.

Contradiction

While agriculture is the backbone of Uganda’s economy and employs more than 70 percent of the population, most farmers practice it without any training, something that has limited their opportunities of transitioning to large-scale merchandised commercial agriculture. In the new budget (2024/25 budget), the government reduced the allocation to the sector by 37 percent from   Shs1 trillion last year to only Shs644.39b. This budget allocation is already far below the required 10 percent allocation to the sector agreed under the 2003 Malabo declaration.

Original Source: Monitor

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