Yasiin Mugerwa
11 August 2008
Members of Parliament have blocked a new government's proposed Shs100 billion facility meant to help farmers in the country access cheap finances from commercial banks.
Trouble began after the Finance Minister, Dr Ezra Suruma, on Thursday failed to convince the Parliamentary Finance Committee as to why the government has failed to establish an agricultural bank to handle the funds in question.
Under the new arrangements, Dr Suruma told the Committee that the Cabinet had endorsed Shs100 billion to be spread through five years and that each year about Shs20 billion will be given to farmers through commercial banks.
"This is a conduit to steal public resources," Rubanda West MP Henry Banyenzaki (NRM) said. "If you want to help farmers the process should be clear otherwise how many farmers will have access to this money. As a committee we cannot accept this proposal until further notice."
MPs heard that in the process where farmers fail to repay the loans, then the government will pay 50 per cent of the loan from Commercial Banks under what has been described as an under-write off loan facility as an incentive to farmers.
However, in his response to the committee's concerns, the Secretary to the Treasury, Mr Chris Kassami, said the government intervened because central banks were unable to lend money to farmers as they are considered risky clients.
"We wanted to assist our farmers access cheap loans because these central banks consider them risky," Mr Kassami said. "This is why we are proposing this facility and we have put Shs20 billion each year for this scheme."
But according to the Parliamentary Budget Committee Chairperson, Mr William Oketcho, committee members have demanded that the government establishes an agricultural bank to handle the scheme.
"When you give this money to these commercial banks they will cheat our people through short-term loans which are not beneficial to farmers," Mr Oketcho said. "This facility is unsustainable and we don't want to lose public money as it was the case with Tri-Star and other failed ventures."
The State Minister for Investment, Prof. Ssemakula Kiwanuka, however, said: "We are facing a development challenge that is why we want to help farmers because we cannot afford to create an agricultural bank now yet there is need for development."
Dr Suruma, however, said agricultural banks require subsidies from the government adding that since 1987 the government has been looking at options on how to help the farmers. But he insisted that any establishment of an agricultural bank will be a loss making venture.
"I will look at this option but such banks need a lot of subsidies from the government," he said. "We should know that it is a complex area to manage and that is why we wanted to help farmers through this facility."
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