One million smallholder farmers from Kiboga and neigbouring Mityana and Kyankwanzi districts are set to benefit from a new loan scheme.
Advance Uganda Microfinance Ltd, which opened its branch in Kiboga town council on August 14, will disburse low-interest agricultural loans to farmers in a bid to boost crop and animal production in the area. Loans, available to both individual farmers and groups, range from Shs 500,000 to Shs 50m.
Julius Kasusse, the branch manager of Advance Uganda Microfinance Kiboga, said they would charge a monthly interest of three per cent on the loans. Coffee, maize, beans, sweet potatoes and cattle keepers are targeted customers in this loan scheme.
As collateral, farmers are required to show proof of ownership of their gardens and farms, group members' approval, motorcycles cards and land titles to access the loan scheme from Advance. aBi Trust has offered the scheme a grant of Shs 102m while Advance Microfinance has added Shs 50m.
Advance has contracted Lion Assurance to provide insurance cover (Kungula) to farmers who get loans through the scheme to guard against risks in case of losses caused by natural disasters such as floods and drought. Traditionally farmers in Kiboga and surrounding districts have been producing food, beef and dairy products for home consumption.
But Advance Microfinance Chief Executive Officer Michael Kasibante is optimistic that with the availability of such affordable loans, farmers would be encouraged to produce for commercial purposes as well. Speaking at the launch of the scheme in Kiboga, Kasibante said they had already received overwhelming response from the farmers.
For instance, he noted that as many as 250 loan applications had been approved in the first month of operation and more had applied. Peter Patels Ochienghs, the acting managing director at aBi Trust, said providing affordable financial services such as Advance's loan packages was a game-changer in the agricultural sector.
Ochienghs noted that government's decision to tax seeds and inputs could be a stumbling block, but added that farmers should take advantage of agriculture loans to increase their production and limit the impact of the new levy. Advance is the third financial institution to partner with aBi Trust to avail loans to smallholder farmers. Recently, the aBi Trust signed deals with Opportunity and Post bank to disburse money to rural farmers.
Advance Microfinance faces some challenges in doing business with its new clients in Kiboga. For instance, Kasibante said many women had expressed interest in taking up loans but they didn't have any collateral because their husbands were not yet convinced of the new products.
There are cases of poor loan servicing, which Kasibante attributes to the fact that farmers are not used to credit, and therefore lack the discipline to pay back. Farmers also don't have records of their previous produce, making it difficult for microfinance loan officials to assess applications and evaluate their credit worthiness.