Uganda\u2019s agricultural market can broadly be characterised in two tiers: commercial and organised agribusinesses, and smallholder farmers.<\/p>\n
Commercial players, including processors, exporters, large farms, commodity traders and input suppliers, obtain the bulk of formal agricultural finance because lenders generally perceive them as lower risk.<\/p>\n
Smallholder farmers, on the other hand, make up the majority of the country\u2019s producers but continue to depend largely on informal sources of finance. These include SACCOs, microfinance institutions, rotational savings groups, supplier credit and buyer advances.<\/p>\n
These channels largely sit outside the formal banking system and are therefore difficult for Government to track or subsidise.<\/p>\n
According to available figures, only 11.3% of private-sector credit goes to agriculture, despite the sector holding more than UGX 30 trillion in deposits. Agriculture is therefore a significant depositor into the banking system, but a comparatively minor recipient of formal lending.<\/p>\n
This imbalance raises an important question: what can be done to ensure that more of the financing available in the financial system reaches the people and businesses driving agricultural production?<\/p>\n Why Is Agricultural Financing Perceived as High Risk?<\/strong><\/p>\n Agricultural financing is perceived as high risk because the sector is exposed to weather, pests and disease, as well as price volatility. These are risks that are largely outside a farmer\u2019s control and are difficult for a lender to price.<\/p>\n This is compounded by limited collateral among smallholder farmers, particularly in regions dominated by customary land tenure, where farmers may have de facto but undocumented, bankable rights to their land.<\/p>\n There is also limited agricultural insurance coverage, high transaction costs, poor aggregation, storage and post-harvest systems, as well as know-your-customer (KYC) compliance constraints.<\/p>\n Another challenge is a structural bias among commercial lenders towards short-term trade finance rather than production lending because most lenders are profit-driven.<\/p>\n When we discuss these issues, the common question is: Who is going to take this risk and cost?<\/p>\n No one is willing to take so much risk. That is where the opportunity for Government to play comes in.<\/p>\n Government Interventions Matter<\/strong><\/p>\n We already have several Government-led interventions seeking to close the agricultural financing gap.<\/p>\n The Agriculture Credit Facility (ACF), administered by the Bank of Uganda for roughly 15 years, provides financing of up to UGX 5 billion through participating financial institutions such as UDB. The facility subsidises the interest cost on qualifying loans.<\/p>\n It covers farm machinery, agro-processing and storage facilities and has recently been extended to include block farming. This is particularly important because it provides a mechanism through which smallholder farmers, who would otherwise fall below the radar of such facilities, can be reached collectively.<\/p>\n There is also the Large-Scale Commercial Farming Scheme, offered at zero interest and administered through banks other than UDB.<\/p>\n The Small Business Recovery Fund, worth roughly UGX 100 billion and held at the Bank of Uganda, was established during the COVID-19 pandemic and remains available to qualifying small businesses, including eligible agribusinesses.<\/p>\n Beyond these credit facilities, there are also mechanisms providing different forms of support across the agricultural economy.<\/p>\n UDB provides both debt and equity financing. The Uganda Development Corporation (UDC) takes equity positions and has directly supported agro-processors and agro-industry entities, while the Microfinance Support Centre serves smaller-scale agriculture-related businesses at a level below what UDB typically finances.<\/p>\n The Parish Development Model (PDM) also plays an important role at the subsistence level, supporting the segment of the market that is furthest from commercial bankability.<\/p>\n The point is that closing the agricultural financing gap requires a continuum of financing and support mechanisms, with different institutions and interventions serving different levels of the agricultural economy.<\/p>\n UDB\u2019s Role in Financing Agriculture<\/strong><\/p>\n At UDB, our total loan portfolio currently stands at roughly UGX 1.9 trillion, up from about UGX 130 billion a decade ago when I joined the Bank.<\/p>\n Of this portfolio, UGX 620 billion, representing 33%, is invested in agriculture, spread across 362 businesses financed directly.<\/p>\n Some of these financing structures include up to 100 smallholders financed under cooperatives or aggregator structures, through which the Bank has been able to reach more than 50,000 farmers directly.<\/p>\n Sometimes there is a misconception that UDB only serves big clients, but we have actually done a lot of work in supporting agriculture and value chains.<\/p>\n Our approach to agricultural financing goes beyond the individual business to strengthen the entire value chain.<\/p>\n We have supported 95 agricultural cooperatives, using value-chain financing to reach farmers who may not ordinarily qualify for conventional SME financing.<\/p>\n For example, when we finance a dairy processor such as JESA, we also need to finance the dairy farmers who supply JESA with raw milk because the processor\u2019s viability depends on a reliable upstream supply.<\/p>\n This means that when considering the financing needs of an agricultural business, we must also consider the ecosystem that sustains that business. The strength of the processor is linked to the strength and reliability of its suppliers.<\/p>\n Our approach is therefore to look beyond the individual business and consider the strength and sustainability of the entire value chain.<\/p>\n Taking Agricultural Finance to Smallholders Through Digital Innovation<\/strong><\/p>\n We are also using digital solutions to make agricultural finance more accessible to smallholders.<\/p>\n Through AgriConnect, a digital lending solution, UDB lends to smallholders organised under Village Savings and Loan Associations (VSLAs).<\/p>\n The solution is designed to enable VSLAs to access affordable, short-term seasonal loans digitally, tailored to support agricultural value-chain development and agribusiness growth.<\/p>\n The entire process, from application to approval and disbursement, is conducted digitally, with funds deposited directly into farmers\u2019 mobile wallets. This provides convenience, speed and transparency.<\/p>\n UDB funded the Ensibuuko platform at a subsidised 5% per annum, enabling farmers to access loans at 1.25% per month, equivalent to 15% per annum, on a reducing balance over six months, including a two-month grace period aligned with agricultural cycles.<\/p>\n Ensibuuko also provides a 2% cashback for timely payments.<\/p>\n This partnership unlocks public capital for grassroots lending and promotes inclusive growth through a blend of Government investment and private-sector innovation.<\/p>\n Piloted in Northern Uganda and West Nile, AgriConnect now covers 665 VSLAs and more than 15,000 individual beneficiaries.<\/p>\n Across our agricultural financing interventions, a total of 53,428 individual members have benefitted.<\/p>\n These interventions demonstrate that UDB\u2019s role is not limited to financing large businesses. We are deliberately using both value-chain and digital financing models to extend development finance to smallholders, cooperatives and agribusinesses, while strengthening the sustainability of the entire agricultural ecosystem.<\/p>\n Reaching Farmers Through Cooperative Financing<\/p>\n There is also a practical question of how financing is structured.<\/p>\n Direct SME lending at UDB carries a minimum loan size of UGX 50 million. By itself, this threshold would exclude the great majority of individual smallholder farmers.<\/p>\n Anything below that threshold is therefore channelled through farmer cooperatives.<\/p>\n If a farmer cooperative has, for example, 500 members, it is difficult for each of those members to walk into a bank and get financed. So, we work with the leadership of the cooperative, which then extends the funds to their individual members.<\/p>\n This approach allows us to reach farmers collectively while also strengthening the structures through which agricultural production, aggregation and value-chain financing can be supported.<\/p>\n It is a model that recognises an important reality: the structure through which finance is delivered can be just as important as the finance itself.<\/p>\n Our focus is to ensure that the structure of financing does not become a barrier to farmers who are at the heart of Uganda\u2019s agricultural economy.<\/p>\n Taking Development Finance Closer to Ugandans<\/strong><\/p>\n Access to development finance must also extend beyond Kampala.<\/p>\n UDB currently has points of representation in Mbale, Gulu and Hoima, with Arua and Mbarara newly opening.<\/p>\n Expanding our presence across the country is part of ensuring that businesses, farmers and other potential beneficiaries of development finance can access the Bank and its services closer to where they operate.<\/p>\n For agricultural financing in particular, proximity matters. The businesses and farmers driving production are distributed across the country, and our financing solutions must respond to where economic activity is taking place.<\/p>\n As we continue to strengthen agricultural financing, our focus remains on reaching more businesses, more farmers and more value chains across Uganda.<\/p>\n Financing Agriculture Requires a Whole-Ecosystem Approach<\/strong><\/p>\n The conversation around agricultural finance cannot be reduced to whether banks are lending enough.<\/p>\n We must also ask whether the financing structures are appropriate for farmers, whether risks are adequately addressed, whether insurance mechanisms are sufficiently developed, whether farmers can aggregate their production, whether storage and post-harvest systems are functioning effectively, and whether producers can access reliable markets.<\/p>\n Government has a role to play in creating an environment where these risks can be better managed and where public capital can catalyse private-sector financing.<\/p>\n Development finance institutions also have a role in taking on risks and financing areas that may not immediately attract conventional commercial lending, while ensuring that the interventions remain sustainable.<\/p>\n At UDB, our commitment is to continue working with Government, financial institutions, agribusinesses, cooperatives, farmers and other stakeholders to bridge the financing gap.<\/p>\n Because ultimately, financing agriculture is not simply about providing loans. It is about building sustainable value chains, strengthening productive capacity, reducing barriers to finance and creating an environment in which Uganda\u2019s farmers and agribusinesses can grow.<\/p>\n The task before us is therefore clear: we must continue scaling interventions that take finance closer to the farmer, strengthen the agricultural value chain and unlock the sector\u2019s full potential as a driver of inclusive and sustainable national development.<\/p>\n","protected":false},"excerpt":{"rendered":" By Dr. Patricia Ojangole, Managing Director, Uganda Development Bank On…<\/p>\n","protected":false},"author":2,"featured_media":5096,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[47],"tags":[],"class_list":["post-5067","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"acf":[],"_links":{"self":[{"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/posts\/5067","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/comments?post=5067"}],"version-history":[{"count":8,"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/posts\/5067\/revisions"}],"predecessor-version":[{"id":5094,"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/posts\/5067\/revisions\/5094"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/media\/5096"}],"wp:attachment":[{"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/media?parent=5067"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/categories?post=5067"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/udbl.co.ug\/blog\/wp-json\/wp\/v2\/tags?post=5067"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/udbl.co.ug\/blog\/wp-content\/uploads\/2026\/08\/Dr-Patricia-Ojangole-addresses-the-Parliamentary-Committee-on-Agriculture-on-Financing-Agriculture-Credit-Insurance-and-Risk-Investment-last-Sat1.png\")
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