Risks and Costs Are Major Concerns In Agricultural Financing

When faced with the question of whether agricultural businesses in Uganda are bankable, a number of mixed answers and arguments have been highlighted. According to Asaph Besigye, one of the authors of the Agricultural Finance Yearbook 2015, risk is the major reason banks give from opting out of funding agricultural businesses. Many of these businesses are termed as bankability deficient. 

Bankability is a connotation that has been used to describe capacity to attract and support commercial financing. As such, because agricultural businesses are considered less profitable, commercial lenders in Uganda assume them to be non-bankable. “The concerns of the finance institutions to Agricultural finance is risk (profitability),” Besigye pointed out. “Are financial institutions bankable policies relevant, flexible and in tandem with agricultural sector?” he rhetorically asked. “It’s not that there is no demand for agricultural finance but there is a divide in understanding bank-ability between finance institutions and farmers,” he explained. 


Besiege thus advised that going forward, there was need for financial institutions to be flexible and factor in small holder farmers who may not meet their bankable criteria. On what else could be done, Besigye saw the need for insurance companies to come in and make agriculture business bankable. “Establishing environment for business registration for farmers through farmer groups and farmer cooperation can be handy,” said Besigye. “Having collateral should be not be a first requirement of bank-ability but a second way out in.”

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