31 August 2014

Uganda: EU Supports Agribusiness

At least 35 private small and medium enterprises, engaged in agribusinesses, will benefit from the 25 million Euros (approximately Shs 87.5bn) donor-supported equity fund set up to avail interest-free grants and technical services.

The Small and Medium Agribusiness Fund (SMADF), which was launched last week, is a joint European Union (EU) and government initiative expected to solve capital constraints faced by mid-size agribusinesses in the country. The fund will specifically tend to beef, commercial forestry and fish farming (aquaculture) enterprises over the eight years that the pilot project will run.

Firms applying to access financing and related services from the fund will be selected based on viability, business models and prudent management. An independent board of investors, comprising private sector experts, will assess the viability of the projects applying for support the fund.

The EU, which has contributed 15 million Euros (Shs 52.5bn) in the project, has tasked the International Fund for Agriculture Development (Ifad) to manage its investment in the Fund.

Speaking after the launch of the of fund at the ministry of finance in Kampala, the Head of EU Delegation Ambassador Kristian Schmidt said they chose Uganda for the pilot phase as the EU attempted to blend public and private resources to boost the agribusiness sector by lowering the cost and risk of investments. Previously, the EU had solely funded government projects.

"The purpose of blending the public resources with resources from investment banks, institutional and private investors is to initiate the process of capital investment in Uganda and create a capital market for domestic financial resources," Schmidt explained

Schmidt noted that formal banking and microfinance institutions shied away from agriculture because of the perceived high risks, and yet the sector is crucial to Uganda's growth, where three out of four people are employed.

The EU envoy said the fund did not aim to compete with local commercial banks, but simply to partner with them to serve the needs of SMEs with the most appropriate financial services.

Maria Kiwanuka, the minister of Finance, Planning and Economic Development, described the fund as a "truly public-private producer initiative."

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