Gaps in agricultural finance in Uganda

Abstract

Despite the dire need for capital by Ugandan farmers, gaps exist between them and Banks and constrain the relationship between the two parties, hindering lending to the farmers. Even increase in Bank Branch network coverage across the country has not addressed these gaps. The 80 percent of Ugandans employed in agriculture can hardly access credit. This report highlights the reasons why this is so, and proposes measures to improve agricultural lending. Data has been collected from various sources like Uganda lending statistics from the Central Bank by analysing the disconnect between trends in financial services initiatives and growth, and the contribution to agricultural finance by the said growth. Findings show that gaps in agricultural finance in Uganda result from inherent characteristics of the farming system; such as poor records keeping, dependence of farm production on nature, volatility of prices of agricultural commodities, inadequate government initiatives and other related characteristics. Most of the prevailing problems are unsolvable by an ordinary single Ugandan farmer; in part due to the extensive shift that would be required to change the manner in which farms are ran and also the fact that farmers out rightly lack control over the factors that influence how banks view their risk profiles as prospective borrowers. There is need to supplement current efforts by stakeholders to close gaps in agricultural finance with initiatives that improve farms at the grassroots. Implementation of government interventions that focus on addressing challenges to agricultural lending is of vital importance.