Uganda: Agricultural Finance Year Book 2020

EPRC. Uganda: Agricultural Finance Year Book 2020. December 2020. 144 pages

12 December 2020. This yearbook discusses the interventions and advances made in policy, strategy, innovations, research; value chain and agricultural investments financing. It further highlights the challenges that policymakers, implementers and value chain actors must address if Uganda’s is to extend its agricultural finance frontier.

The 2020 Agricultural Finance Yearbook, which is the tenth edition in the series, offers an in-depth
analysis of the Agricultural financing landscape in Uganda. The theme for this edition is “Digitalisation and Agricultural financing in Uganda”. 

• The first chapter of the Yearbook includes an analysis of the impact of government’s policy and strategy on the agricultural sector.
• Chapter Two of the book chronicles the results of research into recent innovations in support for smallholder farmers and the provision of rural finance.
• In the third chapter, evidence is presented regarding the financing of agricultural value chains. One of the important finding in this chapter is the lessons learnt from Tanzania’s Consortium Model for the rice value chain. 

Recommendations:

• Government should urgently address issues that place Digital financial services (DFS) transactions under multiple legislations. Existing legislation should also be reviewed so that it adequately covers digital agribusiness. The draft national policy and strategy on agricultural finance should address DFS needs for agriculture, and DFS should be fitted into agricultural cycles, agri-business skilling and extension services.
• Government should support SMEs to; rebuild supply and value chains, find new markets, add value to commodities, overcome COVID-induced indebtedness/arrears (e.g. through loan rescheduling, interest rates subsidisation and partial credit guarantees). In the long term, Government should support SMEs to improve resilience to shocks through enhanced access to; value chain information, digital platforms; certified storage facilities, and a more comprehensive range of financial intermediaries that reach the financially ‘excluded’ and ‘informally included’ ASME operators.
• Those models that have operated viably should be refined and rolled out for broader use in the country. Enactment of a contract farming law, elimination of unfair concessions/waivers imported grain (rice) and setting up systems for collecting reliable agricultural data are some of the underlying conditions for any of these models to succeed.
• Uganda has to provide a legal framework that can attract intra-African investments, ease trade (particularly for fertiliser and agro-machinery), develop relevant agro-industrialisation policies that ensure enforcement mechanisms for commodity auctions, warehousing and central trading platforms. Investments in research for quality have to be improved; public-private partnership for financing research and innovations promoted and investments in roads extended to the rural areas including ‘last mile’ roads.
• The Government should improve the effectiveness of these affirmative schemes by; documenting the impact achieved so far, the viable financing models that have emerged, whether the schemes have effectively addressed risks and other factors curtailing the growth of agricultural finance; how the schemes can offer better-blended finance and contribute to the mobilisation of medium and long-term capital for financing the agricultural sector.