SOROTI – Some farmers in Teso Sub-region have asked the Bank of Uganda to ensure that commercial banks stick to the annual 12 percent interest cap for loans taken under the Agricultural Credit Facility [ACF].
The ACF, launched in 2009, is a public-private partnership meant to bridge the financing gap and support the commercialisation and modernisation of the agriculture sector.
Under the arrangement, commercial banks provide short, medium, and long-term loans to Ugandan farmers engaged in agro-processing, irrigation, post-harvest handling, machinery procurement, farm expansion, inputs purchase, and land opening, among others.
According to government, the agriculture sector is constrained by several factors like inadequate infrastructure, volatility of weather patterns, poor post-harvest handling, subsistence practices, and inadequate access to finance, and the ACF should be the solution to these challenges .
However, George Okolimo, the chairperson Acowa Farmers’ Cooperative Society in Kapelebyong district told this reporter yesterday that some commercial banks charge 16 percent per annum under the ACF.
“As farmers, we are left to the mercy of commercial banks which are exploiting us because we cannot avoid them since they are the option for big loans. If government gives us an agricultural bank,” our prayers would have been answered,” Okolimo said.
Michael Ilemut, a prominent citrus farmer in Katakwi district said farmers who don’t keep records are given expensive loans by commercial banks.
Ilrmut added that farmers who pick up the money are forced to sell off their property cheaply in order to service the loans.
He claimed that some farmers have lost interest in applying for loans under the ACF.
He added: “Not only do commercial banks charge high interest rates, but also take longer processes which interfere with the farmers’ goals.”
Christine Asio, one of the lead farmers in Soroti district said subsistence farmers have failed to mature into large commercial growers because of lack of cheap finance.
Alex Lwanja, the deputy director ACF and Small Business Recovery Fund at BoU acknowledged receiving complaints from some farmers over the high interest rate charged by the commercial banks.
According to him, arrangements to summon commercial banks that charge above 12 percent interest on ACF loans are in the pipeline.
However, he clarified that loans under ACF are given based on the farmers’ capacity, credit history and agricultural experience, adding that the commercial banks would only be safeguarding public funds.
“Farmers should know that Bank of Uganda does not deal with the public directly. This, therefore, means they should go to commercial banks and ask for the loans provided under the ACF.
However, Lwanja said under the ACF, loans worth Shs 751 billion have been disbursed to 3079 farmers across the country.
He said both the government and commercial banks each contribute 50 percent to the loans disbursed under the ACF.
“You can borrow up to a tune of Shs 2.1 billion recoverable in a period not more than eight years. The smallest loan period is 6 months. Note that the interest rate is only 12 percent per annum, which is equivalent to 1 percent per month. Taking note of what the farming is engaged in, a grace period of three years has been provided,” Lwanja said.
https://thecooperator.news/commercial-banks-continue-to-raise-lending-rates/
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