The Deputy Governor Bank of Uganda Louis Kasekende has advised Ugandan farmers to adopt contract farming system which he says can easily help them to get connected to agricultural produce buyers.
Kasekende said farmers are not accessing the market for their produce because they are not connected to bulky buyers such as brewing companies, seed companies among others that need agricultural produces as raw material.
“Farmers need to embrace contract farming if they are to access market both internally and regionally. Farmers will be forced to transform from peasantry to commercial farming because they are sure of the market,” Kasekende said.
Kasekende made the remarks during the Agriculture Financing for African Agriculture Master Class Conference organized by Uganda Agribusiness Alliance in collaboration with other agencies such as Uganda Bankers Association and African Union at Speke Resort Munyonyo.
Contract farming can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.
Typically, the farmer agrees to provide agreed quantities of a specific agricultural product.
Kasekende said farmers who have embraced contract farming especially those growing sugarcane are now “experiencing reduction in the cost of production because they are supported by the sugar manufacturing companies in form of free planting materials and fertilizers.”
“For farmers to benefit from the arrangement, government needs to come up with a regulatory framework that binds together the farmers and the buyer to avoid exploitation by the buyers under the contract farming system.”
During the meeting that attracted over 100 participants from various African countries, participants raised the issue of inadequate access to credit by farmers.
Farmers also noted that poor access to finance have negatively impacted the development of the agriculture sector in many African states.
However, Kasekende said access to credit by farmers will not solve many of the challenges the sector is facing.
He said many farmers across Africa have not embraced Agriculture insurance which is highly needed to address weather hazards.
“In Uganda, we have been on the forefront of supporting farmers to access agricultural credit through agricultural Credit Facility, but most banks still find it difficult to offer agricultural credit to farmers where majority depend on rainfall,” said Kasekende.
“Our farmers need to start practicing modern farming practices which can support sustainable production if they are to pay back the loans,” he said.
Musa Mayanja Lwanga, the Head of Research and Marketing Development at the Uganda Bankers Association said for the agricultural sector to attract more funding from the private sector especially commercial banks , government needs to address the seed policy.
He said Uganda is currently flooded with fake agricultural inputs such as seeds which he said increases the cost of agriculture production.
“When farmers plant fake seeds, it affects production and once the production is low; farmers cannot afford to pay back the credit,” he said.
Erick Sile the Chief Adviser at NEPAD, cautioned the African states to ensure they respect international obligations geared at transforming the agriculture sector.