Uganda finds a “Home” for Agricultural Finance

Mar 07, 2016

An important milestone has been reached by the Government of Uganda with the Ministry of Finance officially taking on the mantle as the “Home of Agricultural Finance”

29 February, Kampala & Johannesburg -
At a recent High Level meeting of key agricultural finance stakeholders in Uganda, held at the Ministry of Finance, Planning and Economic Development (MoFPED) offices in Kampala, an important milestone was reached by the Government of Uganda with MoFPED accepting and officially taking on the mantle as the "Home for Agricultural Finance" in Uganda. Speaking at the Meeting, the Secretary to the Treasury Mr. Keith Muhakanizi said, "as the 'Home' for Agricultural Finance, the Ministry will among other things strengthen its coordination role at government level and hence be relevant to agricultural finance development in Uganda." He thereby immediately appointed a Taskforce, to be chaired by the National Planning Authority, to among other things, guide him in developing an institutional framework, in MoFPED, for agricultural financing and the appropriate mechanisms to support this framework. The Taskforce will also design a work plan for the next year or so, which will inter-alia lead to the development of an agricultural finance policy and strategy for Uganda. Members of this Taskforce include MoFPED, Ministry of Agriculture, Animal Industries & Fisheries, Ministry of Trade, Industry & Cooperatives, Bank of Uganda, SNV Netherlands Development Organisation, Uganda Agribusiness Alliance (UAA) etc. Commenting on the decision, Erick Sile, Agricultural Finance Advisor at the NEPAD Agency, stated "designating a "Home" for agricultural finance is a commendable and outstanding achievement in Uganda, as coordination of agricultural financing issues would ultimately contribute to formulation of policies and strategies that create a conducive environment for private sector entities, which in turn will have the right incentives to increase their participation in the transformation of agriculture in Uganda." Moreover, coordination of the public sector actions in agricultural finance will contribute to the strengthening of coherent, sustainable and socially responsible agricultural finance policies and supportive underlying legal and regulatory systems. Speaking after the Meeting Honourable Victoria Sekitoleko, former Ugandan Agriculture Minister and current UAA Chairperson said "access to agricultural finance remains a major challenge in Uganda, affecting both the capacity of smallholder farmers to generate sustainable income from their farming activities and the ability of the country to attain food security and self-sufficiency." She added that, "the new 'Home' for agricultural finance, in the Ministry of Finance, will certainly guide sector players in the pursuit of a thriving agricultural sector in Uganda." This pioneering policy development in Africa also carries with it hopes for improving coordination of agricultural finance policies and enhancing financial sector support to agriculture in Uganda. Furthermore, these positive changes have the potential of inspiring policy reforms all across Africa driven by the Comprehensive African Agriculture Development Programme (CAADP). ____________________________________________________________________ 1. Background
  • The designation of MoFPED as a Home for agricultural finance in Uganda is a follow-up of previous efforts such as;
  • The recommendations arrived at, from an earlier international agriculture financing Conference held in June 2011 (2011 Conference) in Kampala, under the theme "Zipping Finance and Farming in Africa: Harnessing the Continent's Potential." This conference was organised by the Making Finance Work for Africa (MFW4A) Partnership, a platform aiming at coordinating interventions in the development of financial sectors in Africa. MFW4A together with GIZ/BMZ through the GIZ CAADP Support Programme supports the NEPAD Agency in promoting financing of the agricultural sector.
  • The outcome of the 2011 conference was the generation of a common set of policy principles, dubbed the "Kampala Principles", to improve agricultural finance on the continent. Kampala Principle No. 1 underlines the importance of coordination to strengthen agricultural finance policy. It calls for the need to "address agricultural finance policy strengthening through establishing a specific high level coordination body and by recognizing a single entity as the advocate for agricultural finance".
  • The designation of a Home for Agricultural Finance also benefits from previous efforts by Ministry of Agriculture, Animal Industry and Fisheries (MAAIF), which setup the PMA Agricultural Finance Subcommittee. It was through the initiatives of this Committee that stakeholders realized the need to have a forum where they can discuss and address issues regarding agricultural finance. Discussions with various government ministries agreed that the committee should be turned into a national agriculture finance platform (AFP).
  • Furthermore, a study by MFW4A on agricultural finance policy coordination in Africa reveals that agricultural finance remains a "policy orphan", given the absence of policy frameworks dedicated to agricultural finance and the lack of coordination among stakeholders, with often fragmented policies falling into a void among government ministries and regulatory and supervisory authorities, or even undermining one another. This lack of coordination in turn inhibits the strengthening of coherent, sustainable and socially responsible agricultural finance policies and supportive underlying legal and regulatory systems.
  • Too often the responsibility for policies impacting on agricultural finance falls into a void somewhere between the Central Bank and several government ministries such as Finance, Agriculture, and Trade. Different government bodies have different interests, missions and perspectives concerning agricultural finance. Accordingly, the subject area is frequently pushed to the side and neglected leading to a lack of focus on the challenges and complexity of the interrelationship of the issues and the required policy responses. This results in a fragmentation of efforts (and uncertainty) in a critically important policy area, inhibiting the development of a coordinated legal environment and the need for a policy champion to promote a better understanding of agricultural finance paradigms, to promote change by engaging with various stakeholders and to encourage adoption of the most effective policy measures without excessive government intervention and interference.
  • Building on the above and other efforts, key agricultural finance stakeholders in Uganda have come together to address some of the key challenges in agriculture finance by setting up the Agriculture Finance Platform (AFP). The AFP is a dynamic, responsive and issue-based multi-stakeholder Platform whose purpose is to promote effective actions that will increase the depth, quality and absorption of financial services for (and by) all levels & sizes of actors along the agriculture value chains.
  • The Platform, which is hosted by Uganda Agribusiness Alliance (UAA), brings together the relevant actors and interests, with a holistic approach, so that issues of agriculture finance (including mobilisation of finance for the sector) are supported and sustained by all involved.
  • In 2015, UAA partnered with the NEPAD Agency to create the Investment Facilitation Platform (IFP). It must be noted that most National Agriculture Investment Plans (NAIPs) recognize the need for increased funding and investments in the agricultural sector throughout Africa. However there is little information on how private sector funding can be mobilized to support the increasing needs of the agricultural sector.
  • Implemented in Uganda by UAA and the NEPAD Agency, with support from GIZ/BMZ through MFW4A and the Comprehensive Africa Agriculture Development Programme (CAADP) Support Programmes, the IFP was conceived to address the aforementioned issue, among others, by mobilising and promoting more private sector investments to increase the volume of funds allocated to agriculture. The IFP also seeks to mainstream agricultural financing into the CAADP process.
  • The AFP and IFP were formally launched on 1st December 2015 during the Uganda Agriculture Financing Conference (2015 Conference) that was held at Speke Resort Munyonyo on 1-2 December 2015. The 2015 Conference was co-hosted by the Uganda Agribusiness Alliance (UAA), the Economic Policy Research Centre (EPRC) and the New Partnership for Africa's Development (NEPAD) Agency with support from GIZ/BMZ, through the GIZ CAADP Support Programme, SNV Netherlands Development Organization, aBi Trust and the Government of Uganda. One of the key recommendations from the 2015 Conference was to designate MoFPED as the "Home" for Agricultural Finance given its strategic position in financial sector development in Uganda. It is against this recommendation and as a follow-up, that the AFP and IFP sought MoFPED's consent to this recommendation. In February 2016, MoFPED accepted to be the Home for Agricultural Finance in Uganda.
For more details and media enquiries contact: NEPAD Agency
Mwanja Ng'anjo
Phone: +27 11 2563600
Email: mwanjan@nepad.org
Making Finance Work for Africa Partnership
Hugues Kamewe-Tsafack
Phone: +225 20263065
Email: h.kamewe-tsafack@afdb.org Uganda Agribusiness Alliance (UAA)
Edward Katende
Phone: +256 703 679000
Email: edward.katende@ugandaagribusinessalliance.com