Government is in advanced stages of transferring the Agricultural Credit Facility from commercial banks to Uganda Development Bank (UDB).
The Agricultural Credit Facility (AFC) is a government initiative that seeks to bridge farmers’ financing. However, access to the facility has been limited due to high interest rates charged by commercial banks.
Speaking during the Uganda Animal Industry Investment Facilitation conference in Kampala last week in Munyonyo, Mr Pius Wakabi Kasajja, the Agriculture Ministry permanent secretary, said the Ministry of Finance was in discussions regarding the future of the Agricultural Credit Facility, saying that credit facilities could be offered at a lower rate than the 12 per cent it currently stands at.
“It is at this rate because those currently giving out credit have ring fenced the charges on interest,” he said.
Finance Minister Matia Kasaija told Daily Monitor on the sidelines of the CIC (Uganda) Limited annual general meeting that negotiations to transfer the Facility to UDB were in advanced stages.
The discussions, he said, were ongoing and the Finance Ministry had been tasked with coming up with additional financing options.
“We thought if the Facility is under UDB, then it will be easier for us to determine the interest rate we want farmers to borrow at. We think we can bring it down to 10 per cent or even lower depending on a case-by-case basis. But that can only happen if it is under UDB where we have control,” he said.
Speaking on the sidelines of the Uganda Animal Industry Investment Facilitation conference, Prof Victoria Sekitoleko, the Uganda Agribusiness Alliance chairperson, said the 12 per cent interest charged is unaffordable, especially for SMEs in agro-processing.
How the AFC operates
The facility is operationalised through Bank of Uganda that selects partner banks through which it channels the money to be lent out to farmers.
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