East African Business Week

Kampala-Uganda -While agriculture now offers more opportunities than ever because high prices on the international market are an incentive for investing in farming, the opportunities have not been harnessed due to inadequate capital to finance agriculture.
Financial experts contend that access to agricultural finance by small scale farmers is one of the biggest hampering factors for improving production and rural livelihoods.
Uganda's Agricultural Finance Year Book 2010, notes that agricultural lending by regulated commercial banks, credit institutions and Microfinance Deposit Taking Institutions (MDIs) increased in 2010 substantially by 22%, although the overall contribution of agricultural lending to total lending continued to decline slightly from 9% to 7%.
In the recent Budget for the Financial Year 2011/2012, it was noted that at least 22% of the Agricultural Credit Facility (ACF) to be accessed by eligible farmers and agro processors had been lent out by financial institutions.
The 22%, which is part of the Shs60 billion agricultural facilities, was seen as an improvement in lending to a sector viewed by banks as a risky portfolio.
In 2009/10 Financial Year, Uganda Government set up an agricultural facility amounting to sh30b.
 It was matched by another Shs30bn from participating institutions and credit institutions to make sh60b.
The facility can be accessed at between 10%-12% interest rates.
Despite Government intervention, access to especially agriculture financing, remains limited. The majority of Ugandans are still excluded from the banking system
Farmers are blaming commercial banks for denying them access to the funds by insisting on collateral that they can not afford.
"There are no magical solutions! Farmers need to get to know the banks and banks need to know the farmers. Profitability of agriculture needs to be increased so farmers can access credit," a statement from a farmers forum on agricultural finance said last week.
Banks argue that financing agriculture is more costly, risky and less profitable than financing other sectors of the economy.
The blame game between banks and farmers has raised a lot of concern that needs to be addressed.
"This might be an indicator that formal financial institutions need to develop customized agricultural loan products that will attract farmers hence re-investing in agricultural activities, which will lead to commercial farming," says Chris Kassami, Uganda's Permanent Secretary and Secretary to the Treasury.