MICROCAPITAL.ORG STORY: Centenary Bank of Uganda to Increase Microfinance Lending within Agriculture Sector

For discussion of this topic click here: http://microfinanceassociation.ning.com/forum/topics/rural-microfinance

Centenary Bank of Uganda, a commercial bank with a focus on rural microfinance, has announced that it will increase its loans to farmers, further increasing its agricultural lending [1, 2]. The loans will enable farmers to buy tractors and other machinery up to a maximum of UGX 200 million (USD 95,000) [1]. Farmers owning 100 acres of land will be targeted. Recently the government declared in its 2009-10 budget that a UGX 30 billion (USD 14.2 million) loan guarantee will be made available to banks that extend loans to the agricultural sector this financial year [1]. The government believes this investment will help Uganda recover from the global recession as the agricultural sector employs 85 percent of the labor force. Centenary Bank will also seek to access part of the UGX 88 billion (EUR 30 million) credit facility that the European Investment Bank (EIB) is extending to several Ugandan commercial banks [1].  

Joseph Lutwama, general manager of Credit at Centenary Bank, said that the agriculture sector “is one area that many of us (bankers) have shied away from and yet it is an important factor that leads to development. We know there are high risks but if we evaluate our clients well, the risks can be mitigated, so we can help the farmers boost production.” [1]

The MIX Market, the microfinance information clearinghouse, currently lists 22 microfinance institutions (MFIs) in Uganda, many of which are cooperatives or credit unions [3]. However, the Association of Microfinance Institutions of Uganda (AMFIU), a national network of MFIs, has over 116 members and lists more than 1,000 MFIs and Savings and Credit Co-operative Organizations (SACCOs). AMFIU is an independent institution, formed out of a United Nations Development Program (UNDP) in 1996 and was created to lobby the government to provide a favorable policy environment for microfinance.

According to the ‘2008 Africa Microfinance Analysis and Benchmarking report’ Uganda is one of the top 10 African countries based on the number of borrowers (216,000) and penetration rates (0.7 percent) [6]. Furthermore funding was found to be heavily concentrated in East and West Africa, with 50 percent of the funding going to seven countries, including Uganda [6]. Further details of this report can be found in a Paper Wrap-Up published by MicroCapital [6].

Centenary Bank was established in 1983 as the Centenary Rural Development Trust and was registered as a commercial bank in 1993 [2]. It offers both savings and loan products to all sectors of the Ugandan economy from microenterprises to small and medium enterprises (SMEs) and also to corporate clients. The latest complete information available is as at 31 December 2007 on the MIX Market. At this time Total Assets were USD 200.8 million, with a Return on Assets of 5.37 percent and a Return on Equity of 36.44 percent [3]. The Gross Loan Portfolio was USD 113.9 million and the number of active borrowers was 81,346 [3].  Further information for these two indicators was available at the end of 2008 when the Gross Loan Portfolio increased to 151.3 million and active borrowers increased to 92,611 [3]. No rating information was available.

The current shareholders of Centenary Bank are the Catholic Dioceses (39 percent); the Uganda Catholic Secretariat (31 percent); Stichting Hivos-triodos Fonds, a fully owned subsidiary of the Dutch Investment Bank Triodos (18 percent); the International Solidarity for Development and Investment company (S.I.D.I), a French Investment Bank (11 percent); and individual shareholders (1 percent) [2, 4, 5].

Make your comment at: http://microfinanceassociation.ning.com/forum/topics/rural-microfinance

By Sally Levy, Research Assistant

Bibliography:

[1] Daily Monitor “Centenary Bank to Increase Lending to Agriculture Sector” by Walter Wafula, 21 July 2009, http://www.monitor.co.ug/artman/publish/business_power/Centenary_Bank_to_increase_lending_to_agriculture_sector_88376.shtml

[2] Centenary Bank: http://www.centenarybank.co.ug/index.php

[3] MIX Market Centenary Bank: http://www.mixmarket.org/mfi/centenary-bank/data

[4] International Solidarity for Development and Investment Company (S.I.D.I): http://www.sidi.fr/english.php

[5] Triodos Bank: http://www.triodos.com/com/

[6] MicroCapital Paper Wrap-Up, 19 February 2009, “Africa Microfinance Analysis and Benchmarking Report, 2008”, https://www.microcapital.org/microfinance-paper-wrap-up-“africa-microfinance-analysis-and-benchmarking-report-2008”-by-jennifer-isern-and-estelle-lahaye-of-cgap-and-audrey-linthorst-of-mix/

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