Wednesday, July 27, 2016

GROWING CONFIDENCE IN AGRICULTURAL LENDING



GROWING CONFIDENCE IN AGRICULTURAL LENDING
By Moses Paul Sserwanga
Media/communications Consultant
Advoacte of High Court of Uganda

A new World Bank report “Growing Africa: Unlocking the Potential of Agribusiness,” says that Africa’s farmers and agribusinesses could create a trillion-dollar food market by 2030 if they can expand their access to more capital, electricity, better technology and irrigated land to grow high-value nutritious foods.

The potential of agriculture to reduce poverty and catalyse development in Africa is appealing but the reality to date points to several factors impeding African agribusiness and market development. In Uganda, the Agricultural Business Initiative Trust (aBi Trust[1]) currently in its third year of operation has identified low smallholder agricultural productivity, inadequate agricultural finance, poor marketing strategies and inadequate trade opportunities as factors that are holding back that potential.

This is in addition to inadequate storage facilities and assembling points, limited agro-processing and manufacturing (low value-addition activities), less consultative government policy formulation and policy reversals, poor quality standards of agricultural commodities, and slow pace of agricultural export diversification.
The financing for agriculture in Uganda has improved over the last several years as illustrated by the growing confidence of institutions that have worked with different partners to improve financial services for agribusiness. However, a lot still has to be accomplished.

FINCA Uganda Limited (MDI) was the first licensed Microfinance Deposit-taking Institution (MDI) in 2004; it provides life-changing financial services to Uganda's lowest-income entrepreneurs with the aim of creating jobs, building assets, and improving their standard of living.
In January 2010, FINCA Uganda signed onto the Agribusiness Loan Guarantee Scheme, under aBi Trust.  In its three years of operation, FINCA Uganda’s has registered remarkable overall performance on the scheme standing out in terms of volume and value of loans. It is this performance that formed the basis for raising the MDI’s limit to accommodate its wide scope of financial products. It is important to note that due to a slowdown in the economy and particularly difficult market conditions, 2012 was not a good year for the financial sector. 
The regulated financial services sector faced some challenges that led to a slower than anticipated growth coupled with changes in technology to help improve its efficiency.It specifically recorded a decline in portfolio quality; illustrated by an increase in the ratio of NPA from 1.6 in June 2011 to 3.9 in June 2012, a deterioration that was largely driven by the construction sector.
A positive lending trend, however small, in a sector which is still perceived to be one of the riskiest in the financial services industry has had a positive impact and led to some tangible results. aBi Trust Annual Report 2012 records several success stories that point to change in attitude among financial institutions. This increase in confidence goes hand in hand with some other positive trends such as competitiveness and investment as the following case study that profiles Mr. Willy Oloya illustrates.
A Trader’s Tale
Mr. Willy Oloya is a trader and rice processor with over 22 years ‘experience in the rice trade. A resident of Gulu in Northern Uganda, Willy Oloya has other agricultural interests including maize and oil seeds to a smaller extent though his primary trade is in rice.

Oloya opened his account with FINCA in 2009. At the time he had a 10 ton rice huller machine and wanted to access credit to acquire a 60 ton rice huller machine to build a rice factory. His asset base and profits have since grown from USh 10M to USh 50M. As the demand for rice grew Mr. Oloya quickly recognized that he did not have the capacity to open up more land for the raw material, and that he would have to rely on the farmer communities to produce and supply to him. In order to sustain his growing business Willy has collaborated with several farmer groups, which he has categorized according to the volumes they deliver. In turn, he has linked other commercial farmers to FINCA to access credit to increase productivity.

Trading as M/S NILE SAFARI MILLERS, Oloya reports that the loan has enabled rice production financing at different stages hence increasing rice output and production from 25,000 metric tons (2011)  to 200,000 metric tons (2012) since he works with many more suppliers than those he has linked to the MDI. He currently associates with 2,280 members from 108 farmer groups, located in three Districts of Gulu, Amuru and Nwoya to whom he provides the following services:
         i.            Identifies stage at which they are for most suitable financing needs;
       ii.            Supports their crop selection process, primarily rice which has more stable prices than other cereals e.g. maize;
      iii.            Has a permanent staff to provide farmers with relevant information on the enterprise they are promoting;
     iv.            Hires consultants and Agricultural extension workers to guide farmers on best practices in rice production and post-harvest handling trainings and advice;
       v.            Avails farmers small machinery at a fee to support the land opening process;
     vi.            Provides, at a fee, hulling and storage facilities.

To ensure that he is the farmers’ primary trader, Mr. Oloya has set up buying centers nearer to where the groups are located and contracts farmers on a seasonal commission basis. In addition, he offers farmers other services like planting, weeding, harvesting, storage and marketing. He states that these interventions explain why 99% of the farmers fulfill their commitments to him.
The farmer groups identified by Mr. Oloya are in turn approached by the MDI which trains them three to four times on various aspects of agribusiness - saving, accessing finances and record keeping. It also appraises them for facilities which are sometimes simultaneously done with the training. Finally, the MDI identifies those who are ready for financing either in groups or individually and finances them.
In 2012, 16 groups were identified by Mr. Oloya, out of which the MDI financed 10 groups with 292 members, with the rest being further developed. Out of these groups, five[2] were visited and the findings from the visits are mixed results.



GROWING CONFIDENCE IN AGRICULTURAL LENDING



GROWING CONFIDENCE IN AGRICULTURAL LENDING
By Moses Paul Sserwanga
Media/communications Consultant
Advoacte of High Court of Uganda

A new World Bank report “Growing Africa: Unlocking the Potential of Agribusiness,” says that Africa’s farmers and agribusinesses could create a trillion-dollar food market by 2030 if they can expand their access to more capital, electricity, better technology and irrigated land to grow high-value nutritious foods.

The potential of agriculture to reduce poverty and catalyse development in Africa is appealing but the reality to date points to several factors impeding African agribusiness and market development. In Uganda, the Agricultural Business Initiative Trust (aBi Trust[1]) currently in its third year of operation has identified low smallholder agricultural productivity, inadequate agricultural finance, poor marketing strategies and inadequate trade opportunities as factors that are holding back that potential.

This is in addition to inadequate storage facilities and assembling points, limited agro-processing and manufacturing (low value-addition activities), less consultative government policy formulation and policy reversals, poor quality standards of agricultural commodities, and slow pace of agricultural export diversification.
The financing for agriculture in Uganda has improved over the last several years as illustrated by the growing confidence of institutions that have worked with different partners to improve financial services for agribusiness. However, a lot still has to be accomplished.

FINCA Uganda Limited (MDI) was the first licensed Microfinance Deposit-taking Institution (MDI) in 2004; it provides life-changing financial services to Uganda's lowest-income entrepreneurs with the aim of creating jobs, building assets, and improving their standard of living.
In January 2010, FINCA Uganda signed onto the Agribusiness Loan Guarantee Scheme, under aBi Trust.  In its three years of operation, FINCA Uganda’s has registered remarkable overall performance on the scheme standing out in terms of volume and value of loans. It is this performance that formed the basis for raising the MDI’s limit to accommodate its wide scope of financial products. It is important to note that due to a slowdown in the economy and particularly difficult market conditions, 2012 was not a good year for the financial sector. 
The regulated financial services sector faced some challenges that led to a slower than anticipated growth coupled with changes in technology to help improve its efficiency.It specifically recorded a decline in portfolio quality; illustrated by an increase in the ratio of NPA from 1.6 in June 2011 to 3.9 in June 2012, a deterioration that was largely driven by the construction sector.
A positive lending trend, however small, in a sector which is still perceived to be one of the riskiest in the financial services industry has had a positive impact and led to some tangible results. aBi Trust Annual Report 2012 records several success stories that point to change in attitude among financial institutions. This increase in confidence goes hand in hand with some other positive trends such as competitiveness and investment as the following case study that profiles Mr. Willy Oloya illustrates.
A Trader’s Tale
Mr. Willy Oloya is a trader and rice processor with over 22 years ‘experience in the rice trade. A resident of Gulu in Northern Uganda, Willy Oloya has other agricultural interests including maize and oil seeds to a smaller extent though his primary trade is in rice.

Oloya opened his account with FINCA in 2009. At the time he had a 10 ton rice huller machine and wanted to access credit to acquire a 60 ton rice huller machine to build a rice factory. His asset base and profits have since grown from USh 10M to USh 50M. As the demand for rice grew Mr. Oloya quickly recognized that he did not have the capacity to open up more land for the raw material, and that he would have to rely on the farmer communities to produce and supply to him. In order to sustain his growing business Willy has collaborated with several farmer groups, which he has categorized according to the volumes they deliver. In turn, he has linked other commercial farmers to FINCA to access credit to increase productivity.

Trading as M/S NILE SAFARI MILLERS, Oloya reports that the loan has enabled rice production financing at different stages hence increasing rice output and production from 25,000 metric tons (2011)  to 200,000 metric tons (2012) since he works with many more suppliers than those he has linked to the MDI. He currently associates with 2,280 members from 108 farmer groups, located in three Districts of Gulu, Amuru and Nwoya to whom he provides the following services:
         i.            Identifies stage at which they are for most suitable financing needs;
       ii.            Supports their crop selection process, primarily rice which has more stable prices than other cereals e.g. maize;
      iii.            Has a permanent staff to provide farmers with relevant information on the enterprise they are promoting;
     iv.            Hires consultants and Agricultural extension workers to guide farmers on best practices in rice production and post-harvest handling trainings and advice;
       v.            Avails farmers small machinery at a fee to support the land opening process;
     vi.            Provides, at a fee, hulling and storage facilities.

To ensure that he is the farmers’ primary trader, Mr. Oloya has set up buying centers nearer to where the groups are located and contracts farmers on a seasonal commission basis. In addition, he offers farmers other services like planting, weeding, harvesting, storage and marketing. He states that these interventions explain why 99% of the farmers fulfill their commitments to him.
The farmer groups identified by Mr. Oloya are in turn approached by the MDI which trains them three to four times on various aspects of agribusiness - saving, accessing finances and record keeping. It also appraises them for facilities which are sometimes simultaneously done with the training. Finally, the MDI identifies those who are ready for financing either in groups or individually and finances them.
In 2012, 16 groups were identified by Mr. Oloya, out of which the MDI financed 10 groups with 292 members, with the rest being further developed. Out of these groups, five[2] were visited and the findings from the visits are mixed results.



Thursday, July 14, 2016

FINANCING VALUE CHAINS 2013

FINANCING VALUE CHAINS  2013
By Moses Sserwanga
Media/Communications specialist
For many farmers of Agago  , financial literacy and  banking is a new phenomenon  since many of them had never  even entered a banking hall . The farmers in this remote district of Agago in northern Uganda keep their money under their mattress  a practice which does not encourage saving and investment .
As a  result ,the farmers  continue to wallow in  poverty with little or nor savings at all.  This  problem however ,may soon be history following a campaign by Bank of Africa to extend financial services to the remote parts of the country.
A new  Bank of Africa branch has been set up in Patongo Kalongo in Agago district to encourage farmers save money to accelerate agricultural  business growth.  According  to Mr. Paul Tonny Ekwang  Bank of Africa branch manager  ,the bank made  the decision to set up the branch with support from aBi Trust to demystify the use of the phrase “lack of cash flow” among the farmers.
“  We want the farmers to take advantage of the available  resources such as  Ox-plough, bulls, ample land , human resource  synergy to generate income for themselves and their businesses. That’s  why we are training farmers in financial literacy   which covers book keeping, the importance of  banking , available financial products to  boost agricultural production and marketing among other,” Ekwang says.
Four hundred  and eighty ( 480) farmers in selected business member groups  have been  trained  in Lira Palwo, Omot, Omiya Pacwa sub counties and Patongo and Kalongo town councils. “ The purpose of the training was to equip community beneficiaries  with knowledge  on basic  records keeping and financial management, value addition so that good quality  farm produce  is taken to the market. That way , farmers earn much more and grow their capacity to save and take advantage of other available financial opportunities within the banking sector,” he  explains.
Ekwang said that after the training farmers are in position to  determine their cash sales and have cash record book kept for each member. Farmers are also able to take on agriculture as a business which leads to increased  sales of agriculture produce.
The  farmers are also encouraged to approach the Bank of Africa branches in Patongo and Kalongo to open and maintain bank accounts, access loan facilities  during planting , harvesting and  marketing agricultural produce to increase income .
The bank manager was encouraged to note that following the training farmers who had hitherto never entered a banking hall have come up to open bank accounts. We have realized shs.31m in deposits from new clients .

The bank has also helped farmers to bring financial services near to them. People had to travel long distance to access a bank in Pader district.   With support from aBi Trust , the bank managed to open a new branch in Patongo,  bought  motor cycles they use to  travel to the villages to mobilise and train farmers in financial matters.

Challenges :
Because of trauma resulting from the two decade LRA war some farmers fear to approach the bank because of the armed police guards.


70% of the farmers  want to open a Dero (personal ) accounts  but  do not have  photos, identity cards and LC letters which are some of the requirements for opening up an account .