Government has written off Shs5.51b worth of agricultural loans as money that is unlikely to be recovered.
The money was advanced under the Agricultural Credit Facility, a setup in which government under Bank of Uganda, partners with commercial banks to advance loan facilities to farmers with the aim of spurring commercial agriculture.
In details contained in the Agriculture Semi-annual Budget Monitoring report for the financial year ended June 21, the Ministry of Finance said money advanced to at least 23 projects, amounting to Shs5.51b was declared delinquent (non-performing loans), representing 1.9 per cent of the total loans refinanced.
The rate, the report indicated, had grown up from 1.24 per cent prior to Covid-19-related disruptions.
During the period, the report noted, the Agricultural Credit Facility had received loan applications worth Shs960.5b but by December 2020, cumulative disbursements totaled to Shs581.2b advanced to 863 farming-agricultural related projects spread across the country.
Of the 863 projects, 247 were micro and smallholder farmer borrowers, who had drawn Shs3.86b while Shs205.5b was advanced to 140 borrowers as working capital to purchase grains.
The report also notes that there is need for government to improve loan recovery measures in order to reduce the rate of delinquent loans, which have been worsened by Coivd-19-related disruptions.
However, the report also noted that a number of projects had benefited from the Bank of Uganda credit relief and loan restructuring programmes that have controlled worst case scenario.
At least, by December 2020, the Central Bank had processed 87 project applications with an outstanding loan amount of Shs24.9b for credit relief and restructuring.
In a report by the Central Bank, the Ministry of Finance indicated that by December 2020, monitored farmers had received the loan disbursements with investments made in grain trade, livestock purchase and fattening, farm infrastructure improvements, procurement of tractors and other equipment.
The report also noted that a number of challenges, among which include delayed processing of loans by on average 100 days contrary to planned 15 working days, low market for produce and absence of pricing structures were key impediments in the quest to commercialise agriculture.
The Ministry of Finance also highlighted that the agricultural sector during the 2020/21 financial year had performed fairly with a number of related organizations posting good performance.
For instance, Cotton Development Organisation posted a performance of 70.9 per cent while Dairy Development Authority scored 73.46 per cent.
Agriculture ministry and National Agricultural Research Organisation scored 53.88 per cent and 81.99 per cent respectively.
National Animal Genetic Resource Centre and Data Bank performed at 60.30 per cent, local governments (74.99 per cent) and Uganda Coffee Development Authority (65.47 per cent).
However, National Agricultural Advisory Services, which is also measured together with Operation Wealth Creation, posted the lowest performance, scoring just 26.54 per cent.
According to Mr Patrick Ocailap, the deputy secretary to the treasury, the sectors, amid a number of challenges, posted a fair performance.
Agriculture remains one of the largest sectors that employs a number of Uganda. At least 64 per cent of the country’s population is employed in agriculture or related sectors.
However, much of the activities in the sector have remained subsistence, failing move to commercial level.