Over 18,000 smallholder farmers to benefit from digital loans
YUMBE– The Food and Agriculture Organisation [FAO] and Uganda Development Bank [UDB] in partnership with Ensibuuko, European Union [EU], United Nations Capital Development Fund [UNCDF] last week launched a Fintech solution dubbed AgriConnect to ease access to digital financing for smallholder farmers in Uganda.
The innovation, the first digital solution which can offer both a savings and lending option for small-holder farmers in Uganda, will provide a platform for Village Saving and Loans Associations ([VSLAs] to digitally access short-term seasonal loans and saving products at affordable rates to grow their businesses.
The entire lending process – application, approval, and disbursement – will be done digitally with the funds credited directly to the farmer’s e-mobile wallet.
Speaking at the launch in Yumbe district, Patricia Ojangole the managing director of UDB said; “Together with our partners, we have unveiled an innovative Fintech solution aimed at disseminating credit to the mass lower underserved markets consequently driving financial and digital inclusion.”
She added, “The world is fast evolving resultant of advancements in technology, and it is key that as a development finance partner, we recognise such changes and make a deliberate effort to back inventions that influence the growth of key sectors of the economy like Agriculture, which employs 68 percent of the country’s population.”
The pilot project targets to reach at least 1,000 smallholder farmers. The farmers will have access to digital loans to enable them to increase production, intensify food security, and boost the household incomes of the farming communities across Uganda. Learnings from the pilot will enable the implementers to scale the solution to impact more farmers with a target of 18,000 at full cycle.
“The event is special in two ways: It is the launch of Uganda’s first-ever digital agricultural loan for savings groups, it is also the first-ever launch of a strategic partnership between the Uganda Development Bank and a Ugandan fintech. Such purposeful collaborations are important for financial inclusion, and will go a long way in validating the maturity of Uganda’s fintech landscape,” said Gerald Otim, CEO at Ensibuuko.
Uganda’s scope of financial services encompassed by Fintech has steadily been increasing and this has been necessitated by network readiness, digital literacy, and mobile phone penetration. According to World Bank, Uganda ranks 172nd on Gross National Income [GNI] and 116th on the Network Readiness Index [NRI], respectively. The country’s Mobile penetration is at 49 percent and smartphone adoption is at 16 percent; all of which account for the contribution of the digital economy which contributes 7 percent to the economy.
“Over the last few decades, digitalization has transformed the way of life the world over, causing varied social and economic changes. Likewise, in Uganda, digitalisation continues to take root in shaping various sectors, specifically financial services. AgriConnect will reinvigorate and reshape our country Uganda. This indeed is a timely product for Uganda,” said Evelyne Anite, the State Minister of Finance for Investment and Privatisation.
“With services like this, Uganda is indeed on a good trajectory to achieve its goals as stipulated in the National Development Plan and Vision 2040.”
“UNCDF has been involved in advancing access to finance through digital financial services in Uganda for the last seven years. We have seen solutions like digital payments and savings accounts grow significantly in various agri-value chains. The promise of digitalization unlocking financing for farmers still falls behind – yet it holds the greatest value proposition for them,” UNCDF Technical Advisor – Inclusive Digital Economy, Richard Ndahiro said.
According to Findex 2021, digital financial services have enabled more Ugandans to access formal financial services. 66 percent of Ugandan adults are estimated to have access to an account. However, while 77 percent of Ugandans borrow money – only 31 percent borrow from a formal financial institution and smallholder farmers are top on the list of those excluded from access to formal borrowing.
The new solution leverages digital innovation to enable access to finance for farmers. “This project is one of the ways UNCDF is working with partners and financial services providers to drive digital financial inclusion beyond payments.”
According to FAO, AgriConnect will enhance the agriculture sector and improve farmer livelihoods in Uganda. “FAO believes that Public funding alone is not enough to tackle the world’s most pressing sustainable development challenges – from ending poverty and hunger by 2030 to reducing inequalities,” said FAO’s Country Representative in Uganda, Dr Antonio Querido.
He added: Private investments that generate social or environmental benefits alongside returns can help fill that investment gap. The pilot solution we are launching… is hoped to boost sustainable private investments in the agri-food sector and improve farmers’ access to digital cred.”
The European Union expressed delight in the partnership mentioning that it will set the tone for further deeper and more sustainable collaboration in the future, benefitting underserved populations.
Ojangole urged the smallholder farmers in Yumbe district and the neighbouring areas to embrace this service which will boost their output and participation in agribusiness and called for more meaningful partnerships.
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