Bank of Uganda deputy governor Luis Kasekende
Agribusiness Industry

Central Bank Roots for Contract Farming in Uganda

Bank of Uganda deputy governor Luis Kasekende has advised Ugandan farmers especially small holder to adopt contract farming system which can easily help farmers to get connected to Agricultural produce buyers.

Kasekende observed that many farmers do not access market for their produces because they are not connected to bulky buyers such as brewing companies, seed companies among others, which need agricultural produces as source of raw materials.

“Farmers need to embrace contract farming if they are to access markets both internally and regionally with contract farming, farmers will be forced even to transform from peasantry farming to commercial because they are sure of the market,” he advised

The deputy governor made the remarks during the Making Finance Work for African Agriculture: Masterclass & Conference 2018 at Speke Resort Munyonyo. The conference, running from October 22 to 26, is organized by Uganda Agribusiness Alliance in collaboration with as Uganda Bankers Association, African Union, among other organizations.

He noted that farmers that have embraced contract farming especially those growing sugarcane have seen a reduction in the cost of inputs because they are supported by the sugar manufacturing companies in forms of free planting materials and other things such as fertilizers.

Role of government

But for farmers to benefit from the arrangement, government needs to come up with a regulatory framework that binds together the farmers and the buyer s to avoid exploitation of farmers by buyers under the contract farming system.

The conference attracted over 100 participants from various African countries mainly farmers, bankers and agro processing experts.

The participants raised the issue of inadequate access to credit by farmers especially the small holders. They revealed poor access to finance has negatively impacted the development of the agriculture sector in many African states.

However, Kasekende said accessing credit by farmers will not solve much of the broblems that the sector is facing, adding that many farmers across Africa have not embraced agriculture Insurance which is highly needed currently when most of the countries are experiencing climate change.

“In Uganda we have been on the forefront in supporting farmers to access agricultural credits through Agricultural Credit facility but the challenge most banks are still finding it very difficult to offer agricultural credits to farmers where majority depends on rainfall. Our farmers need to start practicing modern farming practices which can support sustainable production if they are to pay back the loans,” he said.

Musa  Mayanja  Lwanga, the head of  research  and  market development at the Uganda  Bankers Association said for the agricultural sector to attract more funding from the private sector especially commercial banks, government need to address  some of the policies in place such as  seed policy. He noted that Uganda  is currently flooded  with fake  agricultural inputs such  as seeds  which he said increase the cost of agriculture production.

“When farmers plant fake seeds, this affects production and once the production is low farmers cannot afford to pay back the credit,” he said.

Erick Sile, the chief adviser at NEPAD told African states to ensure that they respect International obligations that are geared at transforming the agriculture.