Teso farmers struggling to access Agricultural Credit Facility

SOROTI, August 6, 2025 –– Farmers in the Teso Subregion in eastern Uganda are facing difficulties accessing the Agricultural Credit Facility [ACF], which was established to help boost agricultural production.

The ACF was set up in 2009 by the Government of Uganda in collaboration with commercial banks, Uganda Development Bank Ltd [UDBL], Micro Deposit Taking Institutions [MDIs], and Credit Institutions, to provide medium- and long-term financing to agriculture and agro-processing projects. It focuses mainly on commercialisation, mechanisation, and value addition.

However, farmers in Teso say that stringent requirements for one to benefit from the Facility, and high interest rates are hindering their ability to benefit from the facility.

Initially, the interest rate for the final borrower was capped at 10 percent per annum. This was revised in 2013 to a maximum of 12 percent, following pressure from Participating Financial Institutions [PFIs], who argued that the costs of loan appraisal, recovery, and monitoring were too high to sustain the original rate.

Stephen Epau, Chairperson of Eastern Kyoga Multipurpose Cooperative Limited in Serere District, believes that ACF administrators at the Bank of Uganda have overlooked the needs of ordinary farmers. He urged the government to relax the terms and conditions so the Facility can benefit not just large-scale farmers.

“We don’t have anything to do with the ACF. I think it is only for the rich farmers, and I don’t know how many have got the funding here in Teso,” Epau said, adding that the ACF could be a game changer for small-scale farmers if the requirements were eased.

Modesta Akirior, a farmer from Serere district, shared similar frustrations, noting that accessing the ACF has been an uphill battle for her due to the stringent conditions attached to it. “It’s like those involved are not interested in helping small-scale farmers like me to expand our agricultural enterprises,” Akirior said.

Farmers also cite the 0.5 percent facility fee charged by PFIs on the total loan amount, along with legal documentation and registration costs, borne by the borrower, as additional obstacles preventing them from benefiting from the ACF.

According to Paul Wamono, Deputy Chief Administrative Officer [CAO] of Soroti district, private banks [PFIs]are offering farmers loans at even higher interest rates under their own credit schemes, rather than promoting the ACF.

“The ACF loans are meant to be provided at 12 percent per annum, but banks are charging farmers as high as 25 percent for loans that are not linked to the ACF. I need an explanation,” Wamono said.

In Bukedea district, Moses Godfrey Otim, the District Commercial Officer, noted that although farmers have tried to access the ACF, their efforts have been unsuccessful. He urged the government to reconsider the current requirements so that farmers can truly benefit from the facility.

However, some financial institutions have defended their approach.

Milton Aliga, a Manager at Pride Bank, Soroti Branch, said ACF funding is only provided to farmers organised into groups or cooperatives. He encouraged farmers to form such groups to improve their eligibility.

Similarly, Godfrey Otene, a Manager at PostBank Soroti Branch, said most farmers in the region operate on a small scale, which limits their ability to meet the criteria for accessing the ACF.

Jude Engota, the District Agricultural Officer for Bukedea, advised farmers to consult their local agricultural officers for guidance on the ACF application process.

The ACF offers loans at 12 percent per annum for capital expenditure, such as the purchase of agricultural machinery or equipment. For loans used to finance grain trading, the applicable interest rate is a maximum of 15 percent per annum.

The loan amount under the facility goes up to Shs 2.1 billion, extendable to Shs 5 billion for projects that add significant value to the agricultural sector.

However, the facility is designed to cater primarily to fixed assets such as machinery and value addition equipment, with working capital capped at 20 percent. This structure has limited farmers’ investment in production and input-based ventures, and has excluded many from accessing the loan, forcing them to seek more expensive commercial loans, which can carry interest rates as high as 30 percent.

For example, Global Traders in Nwoya district were compelled to take a commercial loan at higher interest to expand their seed oil production, as the ACF loan they received could only be used to purchase seed oil processing machinery.

https://thecooperator.news/commercial-farmers-in-northern-uganda-urged-to-go-for-cheap-acf-loans/

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