BoU warns banks over slow disbursement of ACF and SBRF loans
MBARARA CITY, March 18, 2024 – The Bank of Uganda [BoU] has asked commercial banks in the country to increase the speed at which they are disbursing loans under the Agricultural Credit Facility [ACF], and Small Business Recovery Funds [ SBRF ].
ACF was set up by government in partnership with commercial banks, Uganda Development Bank Ltd [UDBL], Micro Deposit Taking Institutions [MDIs] and Credit Institutions all referred to as Participating Financial Institutions [PFIs]. The Scheme’s operations started in October 2009, to facilitate the provision of medium and long term financing to projects engaged in agriculture and agro-processing, focusing mainly on commercialisation and value addition.
Loans under the ACF are disbursed to farmers and agro-processors through the PFIs at more favorable terms than are usually available under conventional loans. The scheme is administered by BoU and its operations are guided by the Memorandum of Understanding [MoU] signed by all the stakeholders.
Government is represented by the Ministry of Finance, Planning and Economic Development [MFPED]. The scheme operates on a refinance basis in that the PFIs disburse all the loan amount required by a client and seek for a re-imbursement from BOU.
During a town hall engagement in Mbarara City, Alex Lwanja, Head of ACF at BoU said that in all the regions they have visited, people complain of commercial banks denying them access to ACF and SBRF that was established in 2021 to help small and medium businesses recover from the effects of Covid-19.
Lwanja said: “People are aware of the government credit products in commercial banks but whenever they go for them, the banks either delay them or refuse to give them the funds.”
He said that instead banks lure the borrowers to take their own loan products, leaving ACF, and SBRF funds unutilised yet their purpose is to improve the livelihoods of the beneficiaries and contribute to the country’s socio-economic development.
According to Lwanja, ACF started operating with a total of Shs 20 billion but as of now a total of about Shs 759.4bln has been disbursed to the farmers to add value to their products.
On the other hand, SBRF started with a total of Shs 100bln from government and was supposed to be matched with another Shs 100bln from the stakeholder financial institutions. “As we speak now, we have given out Shs 12bln under SBRF but we have not performed well here simply because most commercial banks are reluctant to give out this money to the beneficiaries,” Lwanja said.
He therefore appealed to the government to bring all the commercial banks onboard to unlock the SBRF to the people.
“We have around 33 participating commercial institutions but we have a challenge that only 8 commercial banks are participating but we are trying to see that all the commercial banks get involved into the mechanism of giving this money such that the objective of this SBRF established can be achieved by the government,” Lwanja said.
Philip Andrew Wabulya, Executive Director Petroleum Investment Fund at BoU, retaliated that the cumulative disbursements of ACF increased from Shs 21 bln in 2010 to Shs 840bln as of September 2023.
“The Agriculture Credit Facility is to add value onto their agricultural products such that they can earn foreign exchange such that we improve the income levels of the beneficiaries but now it is quite annoying and challenging that it has come to our notice that the commercial banks are not helping people to access this Fund,” Wabulya said.
According to Wabulya, the Western region received Shs 162bln with a total of 1493 beneficiaries representing 40 percent at the block allocation uptake of Shs 10bln.
“The block allocation provides micro and small holder farmers in access to finance by allowing them to use alternative collateral like mortgage property, inventories and credit histories and I must thank the western region that is doing very well,” Wabulya said.
The beneficiary enterprises include; poultry farming, dairy and beef production, cattle restocking and crop production.
Despite its growing popularity, Wabulya stressed that the ACF has not yet reached its potential due to limited financial literacy thus appealing to the commercial banks to release the funds to the beneficiaries.
“As Bank of Uganda, we do encourage these participating institutions to give this agriculture credit facility to the people to positively impact Uganda’s vision by 2040,” he said.
Wabulya also explained that the loan disbursement under SBRF increased from Shs 10.5bln in June 2023 to Shs 16bln as of September 2023.
He said that out of Shs 16bln disbursed, Western region has so far received Shs 2.4bln benefiting a total of 201 small and medium enterprises and 972 retail trade SMEs.
On his part, Dr Michael Atingi-Ego, Deputy Governor of BoU, reported that the SBRF has not been utilised fully, thus urging the leaders in Western Uganda to champion agriculture modernisation and value addition by taking advantage of the Fund.
“As of 1st December 2023, the amount disbursed is about Shs 18.4bln to over 1500 SMEs from the potential Shs 200bln. This means that people are just coming for small monies but given the prominence of agriculture in Mbarara and other areas in Ankole, Bank of Uganda can unlock the Small Business Recovery Fund to people fostering agricultural modernisation,” he noted.
The stakeholders’ meeting was also attended by a delegation of bankers from Rwanda, local leaders among others.
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