Commercial Banks have been urged to find innovative means of reducing the interest rates charged on agricultural loans to allow more farmers access to credit.
The Governor Bank of Uganda, Emmanuel Tumusiime Mutebile said banks can reduce operating costs through use of technological innovation which will allow them to extend some of the profits to agricultural borrowers through reduced borrowing interest rates
He said although agricultural lending has improved over the years from 5.16% of commercial banks total loans and advances in 2009 (Shs 208.42b ) to 1.6 trillion or 12.22% in 2018, there is still a big lending gap compared to the share that the agricultural sector has on the Country’s Gross Domestic Product.
“Agricultural lending portfolio for commercial banks is only 12.22%, lower that the agricultural sector’s share of Uganda’s GDP which stood at 21.4% as of second quarter of 2018/2019,” he said.
However, Mutebile also noted that access to credit is not the only challenge facing agricultural growth in Uganda and called on different stakeholders to find lasting solutions for these challenges
“As a means to further de-risking the agricultural sector, Innovative solutions need to be engineered to support the agricultural financing. For linking borrowers to sustainable agricultural insurance schemes, and commodity markets development among other potential solutions” he said
This was during the 3rd annual Bankers conference hosted by Uganda Bankers Association (UBA) at Kampala Serena hotel on Tuesday.
The conference brings together bankers, policy makers and other sector players to discuss new prospects challenges and solutions to the banking sector in Uganda and the East African Region.
This year’s conference which was graced by the Minister of Finance, planning and Economic Development Matia Kasaija, was held under the theme “De-risking financing and investment in agriculture to promote decent youth employment and inclusive growth” with focus on agricultural financing as a way of supporting the agricultural sector and making it attractive for the youths and hence reducing unemployment.
Governor Mutebile noted that the agricultural sector still remains the focal sector for Uganda that can spark inclusive growth and support the ever increasing population that is estimated by the World Bank to grow by 108m people in 2050
Chairman Uganda Bankers’ Association, Patrick Mweheire said Commercial banks are doing everything possible to increase agricultural financing by putting in place special agricultural loan products that are fit for the sector
He further commended the government and other development partners for purposely putting in place financial products/funds to enable banks to be able to lend to farmers at reduced costs