Stanbic Bank Limited and Post Bank Uganda Limited have been cited as the best providers of loans to farmers in the commercial banks and credit institutions categories, respectively.
The two institutions have been giving loans to farmers under the Agriculture Credit Facility (ACF) which is administered by the Bank of Uganda (BoU).
The ACF is now in its 10th year of operation since it was established in the year 2009 by the Government of Uganda in partnership with participating financial institutions (PFIs) that include; commercial banks, micro deposit-taking institutions, credit institutions and Uganda Development Bank Limited.
Stanbic Bank and Post Bank Uganda were yesterday awarded at the ceremony held at Sheraton Kampala Hotel to recognise the efforts of the PFIs in advancing the ACF objectives.
At the awards ceremony, Matia Kasaija, the Finance Minister said that, “As the competition intensifies in the financial services sector partly driven by technological innovations, success will come to those who tap into sectors with the high turnovers. Agriculture despite its risky nature is one of those sectors.”
The minister said private sector credit to agriculture has increased from Shs562 billion in 2013 to over Shs1.5 trillion in 2018. “Nonetheless, this is only 1.52 percent of the national income that stood at Shs100,531 billion for Financial Year (FY) 2017/2018 for a sector that contributes 24.2 per cent to the Gross Domestic Product (GDP),” he said.
Dr Kasekende said, “The many good stories of the firms and farms that have been expanded in terms of size and output and whose productivity has improved are testament to the impact of the ACF.”
Kasekende said the ACF played a catalytic role for financing of the agriculture sector. He said the share of loans to the agriculture sector by the BoU’s regulated commercial banks, credit institutions and microfinance deposit-taking institutions has more than doubled from 5.1 per cent in July 2009 to 12.7 per cent in March 2019.
He however said there is need to de-risk the agricultural sector so as to encourage the private lenders to consider increasing their lending to the medium and large scale farmers. “This requires the provision of a holistic set of support mechanisms dealing with the entire production and value chain from land rights, quality control and timely provision of inputs, provision of information and extension services to post harvest handling and marketing of the produce,” he said.
He praised ACF in terms of loan repayment saying that as at December 2018, the ACF had a low non-performing loans (NPL) ratio of about 1 per cent, compared to 6.9 per cent for the overall agricultural loan portfolio of the banking sector as a whole.