Bank of Uganda will start giving an agriculture credit facility loan of up to 20 million Shillings to farmers without collateral security.
Dr Rosette Bamwine, a senior principal banking officer and head agricultural credit facility Section at Bank of Uganda says the collateral free loan will be introduced to cater for small scale farmers who have been complaining of lack of collateral security.
Speaking at the 7th National Forum on Agriculture and Food Security convened by Makerere University Economic Policy Research Centre at Serena Hotel today, Bamwine said small scale farmers will get the loan if they are in good records with banks, have records and consistent cash flows and have been paying previous loans.
She said a new Memorandum of Understanding with collateral free loan of up to 20 million Shillings has been signed with commercial banks providing agriculture credit.
The agricultural credit was set up by the government in partnership with commercial banks and microfinance institutions in 2009. The scheme aims at facilitating the provision of medium and long term financing to projects engaged in agriculture and agro processing, focusing mainly on commercialization and value addition.
Unlike commercial banks that lend at high interest rates, the agriculture credit facility interest rate to the final borrower is up to a maximum of 12 percent per annum. The loan also comes with a maximum payment period of up to 8-years with a 3-year grace period.
Farmers and agro processors can borrow a maximum loan amount of 2.1 billion Shillings but the amount can be increased up to 5 billion Shillings on a case by case basis for projects that add significant value to the Agriculture sector and the economy as a whole.