Uganda: government unlikely to recover Sh5.5 billion advanced in agricultural loans

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The government wrote off the value of Shs5.51b of agricultural loans as money which is unlikely to be recovered.

The money was advanced under the Agricultural Credit Facility, a setup in which the Bank of Uganda government partners with commercial banks to provide loan facilities to farmers with the aim of boosting commercial agriculture.

In details contained in the semi-annual agriculture budget tracking report for the fiscal year ended June 21, the finance ministry said the money advanced to at least 23 projects, amounting to $ 5.51 billion. shillings, was declared past due (non-performing loans), representing 1.9 percent of total loans refinanced.

The rate, according to the report, had risen from 1.24% before the Covid-19 disruption.

During the period, the report notes, the Agricultural Credit Facility had received loan applications worth 960.5 billion shillings but as of December 2020, cumulative disbursements stood at 581.2 billion shillings. advanced to 863 agriculture-related projects spread across the country.

Of the 863 projects, 247 were micro and small farmer borrowers, who had drawn 3.86 billion shillings while 205.5 billion shillings had been advanced to 140 borrowers as working capital to purchase grain.

The report also notes that the government needs to improve loan collection measures in order to reduce the rate of delinquent loans, which has been made worse by the disruption related to Covid-19.

However, the report also noted that a number of projects had benefited from the Bank of Uganda’s credit relief and loan restructuring programs which controlled the worst-case scenario.

At least, by December 2020, the Central Bank had processed 87 project applications with an unpaid loan amount of 24.9 billion shillings for credit relief and restructuring.

In a report from the Central Bank, the Ministry of Finance said that in December 2020, the supervised farmers had received the loan disbursements with investments made in the grain trade, purchase and fattening of livestock, l ‘improvement of agricultural infrastructure, purchase of tractors and other equipment.

The report also noted that a number of challenges, among which the delayed processing of loans by 100 days on average as opposed to the expected 15 working days, weak product market and lack of pricing structures were key obstacles in the process. the quest for commercialization of agriculture.

The finance ministry also pointed out that the agricultural sector in FY2020/21 had a fair performance, with a number of related organizations performing well.

For example, the Cotton Development Organization posted a performance of 70.9 percent while the Dairy Development Authority scored 73.46 percent.

The Ministry of Agriculture and the National Agricultural Research Organization obtained 53.88 percent and 81.99 percent, respectively.

The National Animal Genetic Resource Center and database reached 60.30 percent, local governments (74.99 percent) and the Uganda Coffee Development Authority (65.47 percent).

However, National Agricultural Advisory Services, which is also measured with Operation Wealth Creation, posted the weakest performance, scoring only 26.54 percent.

Fair performance

According to Mr. Patrick Ocailap, Assistant Secretary of the Treasury, the sectors, in the midst of many challenges, performed well.

Agriculture remains one of the most important sectors employing a number of Ugandans. At least 64 percent of the country’s population is employed in agriculture or related sectors.

However, much of the sector’s activities have remained subsistence, without moving to the commercial level.


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