Smallholder farmers across Uganda have welcomed a move by Microfinance Support Center (MSC) to, through cooperative societies, offer them low-cost loans as compared to offers by commercial banks.
The move that has been termed by the producers as game changer to the agricultural sector will see farmers under the arrangement access loans at 8 per cent interest rate which is not possible in commercial banks, according to Mr. Samuel Ssentumbwe Magala, Chief Executive Officer of the National Alliance of Agricultural Co-operatives in Uganda (NAAC).
Most of our commercial banks are currently charging between 25 and 30 per cent interest rates on the loans, but the MSC is willing to give loans at interest rates as low as 8 per cent,” said Magala.
With this, he said, the agricultural industry in Uganda is poised for growth and poverty will steadily reduce among the population, especially in the upcountry.
The latest data by the Uganda Bureau of Statistics (UBOS) indicates that the country has about 70 per cent of its population employed in agriculture that produce a wide range of products such as coffee, sugar, tea, livestock, tobacco, fish, edible oils, cotton, corn, beans, plantains, sweet potatoes, cassava, millet, groundnuts and sorghum.
However, commercialisation of agriculture is facing financial headwinds as producers are limited use of quality seeds and fertilizer, and lack of irrigation infrastructure which makes production vulnerable to climatic changes and pest and diseases invasions.
Magala says that since access to loan services has been difficult for farmers through commercial banks, the move by the government to make it easy and affordable through microfinance support center will greatly facilitate farmers.
“The loan targets all farmers, not any specific valve chain. Whether it is in livestock, coffee, tea, horticulture and so forth as long as a corporate has come together and they have organized themselves and they have identified the market where they are going to sale their product,” he said.
Climate challenges
According to Emmy Geoffrey Sayekwo, the chairperson at NAAC, the government should invest more in sensitising farmers about the current climate change challenges that are affecting farmers’ output.
“Climate change has hit mostly smallholder farmers, yet the majority of them do not have the capacity to mitigate the effects. This is upsetting all the value chains,” said Sayekwo.
Mr. Stephen Ekalam, a model bee farmer in Uganda’s Ngora District and National Alliance of Agricultural Co-operatives in Uganda says that the insects have been affected by the climate change too.
“Used to harvest much honey and wax from my beehives but of late, bees do not form proper colonies and as a result production of these products are sometimes low,” said Ekalam.
He proposes that farmers should be given an opportunity to access low-cost interest loans as well as accessing agricultural insurance so that in case of occurrence of such calamities they are able to be compensated and the financial institutions will be able to provide the farmers with low-interest rate loans.
