MICROCAPITAL STORY: Ugandan Microfinance Minister Emphasizes Provision of Agricultural Finance in the Region

In a closing speech at the annual general meeting of the Association of Microfinance Institutions of Uganda (AMFIU), Ugandan Minister of Microfinance, General Salim Saleh stated “Provision of agricultural finance is the actual bullet that will kill poverty“. The minister continued that before financial provision could aid the agricultural sector, the National Agricultural Advisory Services (NAADS) should provide advice and technical assistance to farmers to prevent crop failures and other problems that could cause delay or failure of loan payments, emphasizing “appropriate funding to worthwhile agricultural projects.”

As reported by the World Bank, currently, 38 percent of Uganda’s population lives in poverty, two thirds of which are small farmers. In the past decade, Savings and Credit institutions (SACCOS) have been established in rural areas in an effort to reduce poverty, however, poor outreach and weak infrastructure remain huge obstacles.

Poor roads in remote rural areas prevent timely transportation of produce and lack of education and technology to reduce pest disease often cause preventable crop failure. The majority of the rural poor rely on subsistence farming geared towards satisfying the needs of their family. Their traditional methods most often do not enable them to overcome poverty. Because of the high risks involved, farmers are unwilling to invest in larger, more profitable holdings.

The country’s current period of relative economic stability presents a feasible opportunity to reduce rural poverty. Currently, only about 10 percent of the rural population has access to financial services.

In order to improve outreach, first basic infrastructure issues must be resolved, according to a 2004 Consultative Group to Assist the Poor (CGAP) effectiveness review. In a country where only 9 percent of the population has access to electricity, agricultural finance strategies must go beyond the establishment of microfinance institutions. “Worth while agricultural projects” as stated by General Salim Saleh first must be facilitated by improved access to basic services.

By Melissa Duscha

Additional Resources:

All Africa: Uganda: Saleh Wants Micro Finance to Boost Agriculture

Rural Poverty Portal: Rural Poverty in Uganda

World Bank Country Overview: Uganda

World Bank Development Data: Uganda at a Glance

World Bank: Uganda Microfinance Sector Effectiveness Review

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