Insurance companies to back farmers get loans

Sep 23, 2010

Farmers will be able to get credit from financial institutions to increase production with the introduction of the input financing and crop insurance scheme. The decision was announced by Godfrey Mundua, head of Commodity Trade and Agriculture section at Standard Chartered Bank, while meeting farmers and coffee traders, reports Prossy Nandudu.

Farmers will be able to get credit from financial institutions to increase production with the introduction of the input financing and crop insurance scheme.
This was announced by Godfrey Mundua, head of commodity trade and Agriculture section at Standard Chartered bank, while meeting farmers and coffee traders at the Sheraton Kampala hotel. The meeting was aimed at equipping coffee dealers and farmers with knowledge about products that will assist them run their businesses more efficiently. “We are looking at making finance available for farmers, for example small holder farmers ,and we are looking for finance to enhance the agricultural value chain,’ said Mundua. He added that commercial banks will be looking at the underlying value of the crop that a farmer will produce.


“So the bank organizes with the insurance company under the Multi perils cover, in which farmers with no collateral and who don’t have strong balances, which banks require when giving credit, can access credit” said Mundua. A Multi peril insurance cover is an insurance policy that covers farmer’s risk of loss of crops either because of floods, disease or drought. This is in response to concerns from farmers that they were failing to access credit because they don’t have collateral to present to the bank, given the fact that most of them depend on weather patterns. Mundua said that talks are in progress with insurance firms in Tanzania and Kenya because this scheme has worked there, providing insurance cover and are ready to extend their services to Uganda.

So farmers will be grouped into smaller groups then attached to an insurance company such that if they fail to pay back they are covered by the insurance firm. “If we have sizable number of farmers, who are willing to take the product, the premiums will be made affordable. And others will be linked to an off taker attached to the Insurance Company then the cost will come down,” said Mundua. He added that coffee traders will be able to access credit using their ware house receipts.

The system is aimed at helping traders to provide working capital they need to buy produce during the bumper harvest. “In Uganda most people don’t have post harvest handling facilities, its important
banks look at financing traders at a point which the farmers harvest the product”, he said.

The bank will give a limit that allows traders to buy the commodity when it is time for harvest then the bank will evaluate the commodity itself, added Mundua.