The International Fund for Agriculture Development (IFAD) on Tuesday announced that Uganda had been allocated $168 million (about Shs651.6 billion) for rural transformation through agriculture. The allocation is aimed at enabling rural farmers to access long term loans for agricultural practice.
The fund, which has a duration of seven years, is being administered under the IFAD arrangement called the Project for Financial Inclusion in Rural Areas. In Uganda the project is being implemented by the ministry of Finance and it entered into force in November 2014.
In an interview with Daily Monitor at Speke Resort Munyonyo on Tuesday at the official opening the fourth Regional Conference on Implementation of Rural Agriculture Transformation, with the theme financial inclusion, IFAD regional director of Eastern and Southern Africa Division, Mr Sana F.K. Jatta, said IFAD has 45 ongoing projects in 22 countries in the region with the total portfolio of $1.7 billion.
One of the greatest challenges in our economy is the strain in accessing credit. It’s a quandary Ugandans generally face irrespective of the traditional gender or net-worth biases.
Many astute businessmen confess of how it’s problematic for them to access credit from the mainstream financial institutions. It gets worse particularly for the rural women.
Some microfinance and banking institutions have done well rolling out various credit facilities for micro, small and medium-sized women entrepreneur groups. But the terms are distressing.
The repayment periods are too short and the interest rates are high. Commencement of repayment is expected within 30 days getting the funds and the loan could have been subjected to deductions.
This triggers panic as clients dash to meet the bank’s terms of repayment. This has kept majority of the women in a cycle of borrowing as much of their profits are recouped back in interest.
So, a woman who first borrowed years back to boost her second-hand clothes business, remains the same since the financial institution has mastered the art of draining her profits.
For the rural women, it’s even worse. Besides the inadequacy of financial institutions in their areas, women do not have the collateral required to access credit. This represents a disjoint in our quest to become a middle income economy by 2020.
The ministry of Finance, Planning and Economic Development will close micro-finance businesses countrywide that will fail to comply with licensing by the Uganda Micro-finance Regulatory Authority (UMRA).
The Tier 4 micro finance institutions and moneylender Act of 2016 will be effective July this year and will see micro-finance businesses licensed.
The overall purpose of the law is to provide for the licensing, regulation and development of all Tier 4 micro finance institutions.
The Tier 4 include non-deposit takers such as credit only NGOs, Saccos, moneylenders and small member based organisations/community based micro finance institutions.
The initiative is part the nation’s Rural Income and Employment Enhancement Project implemented by MSC on behalf of the East African nation’s government, the Kampala-based company said in a statement on its website.
The Jeddah, Saudi Arabia-based Islamic Development Bank is funding experts from Bank of Khartoum to develop a framework for the implementation of Islamic micro-finance in Uganda, according to the agency.
Uganda’s parliament amended laws governing finance to accommodate Islamic financial products in January and the central bank says it is developing regulations for the system.