As of March 2025, the policy landscape for farmer loans in Uganda. Reflects a mix of government initiatives, financial institutions, and public sector supporting the agricultural sector. Agriculture remains a cornerstone of the country’s economy. Agriculture employs about 68% of Uganda’s working population and contributes approximately 24% to GDP, yet access to affordable and tailored credit for farmers, particularly smallholders, continues to be a significant issue. This article is focused on the state and implementation of the farmer loans and Policies. It also elaborates how young Ugandan farmers can access capital for expansion. The Government is the major player in providing the loans and amending policies to improve farmers’ livelihoods in the country. Let us dive straight into the key Government Initiatives.
Agricultural Credit Facility (ACF).
Established in 2009 by the government in collaboration with the Bank of Uganda (BOU) and commercial banks. The ACF aims to provide affordable credit to small holder farmers and Agro-processors. It offers loans at subsidized interest rates (typically around 8-13% per annum) compared to market rates, which can exceed 18%.
The facility supports a range of activities, including farm expansion, input purchases, and equipment leasing. Loans range from 10 million to 1.5 billion. with replacement periods up to 8 years and a grace period (6 months to 2 years) to align with agricultural seasons. The focus here is on the youth and women entrepreneurs to promote inclusivity, emphasizing the crop, livestock, fisheries, and agro-processing.
Recent amendments (post-2018) have expanded its scope to include financing for agricultural inputs and smallholder-focused products like the Block Allocation Product. However, its reach remains limited, with commercial banks accounting for over 60% of agricultural loan disbursements. Primarily targeting large-scale farmers due to perceived risks in lending to smallholders. Collateral requirements, financial literacy, climate risks, and gender gap are the main factors hindering this program in the country.
However, over UGX 400 billion had been distributed by 2021, benefiting thousands of farmers. Notably, the Adoption of technologies like solar dryers and milk coolers since the commencement of the program. Other benefits of the program include: increased productivity, income growth, modernization, and food security.
Parish Development Model (PDM).
Launched as part of the Third National Development Plan (NDP III, 2021-2025), the PDM is a flagship government program to transition subsistence farmers into the money economy. In the Financial Year of 2023, it established 10,585 savings and credit cooperatives (SACCOs) and disbursed UGX 877 billion (about $239 million) in loans to 880,000 households. This initiative integrates financial access with agricultural development, though its long-term impact on loan accessibility is still unfolding.
The model is structured around production, storage, processing, and marketing; infrastructure and economic services; financial inclusion; social services; mindset change; community data systems; and governance. Implementation focuses heavily on agro-industrialization, prioritizing commodities like coffee, maize, and fish targeted to boost household incomes.
Current Sentiment and Outlook.
Optimism: Government officials, like Minister Mutasingwa, tout PDM as a “beacon of hope” for rural communities, citing its potential to bridge infrastructure and service gaps. The model aligns with Uganda’s Vision 2040 for a modern economy.
Uncertainty: Analysis from groups like the Economic Policy Research Centre and concerned citizen all over social media question PDM efficacy, pointing to politicization, corruption, and a history of unimplemented plans. The gap between promises (e.g., UGX 100 million per parish) and delivery fuels distrust.
Economic Context: With Uganda’s GDP growth projected at 7.0% for 2025 (per AfDB estimates) and oil production looming, PDM could gain momentum if revenues are channeled effectively. However, climate shocks and a $65 billion agricultural financing gap remain hurdles.
Below are simple steps to follow if you wish to apply and benefit from the Parish Development Model.
- Identify Your Parish
The PDM is implemented at the parish level, so start by confirming which parish you belong to.
- Engage with Local Leaders
Reach out to your Parish Chief or local officials to learn about available PDM programs, such as skills training, microfinance, or entrepreneurship support.
- Attend Community Meetings
Join parish meetings to stay informed about opportunities and express your needs or ideas.
- Apply for Programs
Submit applications for relevant initiatives like vocational training, small business grants, or agricultural support. Depending on what’s offered in your parish.
- Meet Eligibility Requirements
Check and fulfill any specific criteria, such as age or unemployment status, for the program you’re interested in.
- Follow the Process
Complete forms, provide documents (e.g., ID, LC1 Letter), and attend any required interviews or sessions.
- Participate Actively
Once enrolled, fully commit to the program. Whether it’s starting a farm/ business, learning a skill, or contributing to a community project.
- Track Your Progress
Monitor and report your progress as required to ensure accountability and success. By staying proactive, informed, and engaged. Ugandan youth can use the PDM to gain skills, access resources, and improve their livelihoods.
Uganda Development Bank (UDB) Support.
In 2021, Parliament approved a $65 million loan guarantee for UDB to provide stimulus packages to farmers, channeled through government-owned banks like Postbank and Housing Finance.
However, concerns persist about high interest rates (around 13%) and limited rural outreach, making it less accessible to small-scale farmers.
By FY 2023, agriculture accounted for approximately 25% of UDB’s total loan portfolio. With disbursements targeting farm inputs, equipment, and value-addition projects like agro-processing. For example, UDB has financed grain milling and dairy processing ventures, aiming to boost farmer incomes.
The bank’s Special Programs, such as the Small & Medium Enterprises (SME) window, include agricultural enterprises. Offering loans with flexible repayment terms (up to 15 years) and grace periods tailored to farming cycles.
UDB works alongside the ACF, managed by the Bank of Uganda, to co-finance agricultural projects. It also aligns with the PDM by supporting agro-enterprises that can integrate smallholder farmers into value chains. Though its direct engagement with grassroots SACCOs remains limited. While ACF disbursements grew by 17% annually since 2018, UDB’s role has been to bridge gaps for medium to large-scale farmers ineligible for smaller ACF loans.
UDB has prioritized agro-industrialization, funding projects like coffee processing plants and maize storage facilities. In 2023, it reported supporting over 50 agricultural enterprises, creating indirect benefits for farmers through market linkages and price stability.
Recent Developments (2024-2025).
- Capital Injection: In late 2024, the government recapitalized UDB with UGX 100 billion to enhance its lending capacity, part of which is earmarked for agriculture as oil revenues loom on the horizon (production expected late 2025). This follows a pattern of incremental funding, with UDB’s capital base rising from UGX 500 billion in 2020 to over UGX 1 trillion by 2025.
- Sustainability Push: UDB has integrated climate-smart agriculture into its lending criteria, offering incentives for farmers adopting solar irrigation or drought-resistant crops, aligning with Uganda’s NDP III (2021-2025) goals.
Financial Institution Offerings.
Commercial Banks and Microfinance:
Banks like Centenary Bank, Stanbic Bank, and PostBank offer specialized agricultural loans. For example, Centenary Bank provides loans from UGX 100,000 to UGX 8 billion with flexible repayment plans tied to agricultural seasons. PostBank’s agricultural loan book has grown over 70% since 2021, targeting a doubling to UGX 200 billion by the end of 2025, using innovative solutions like produce-backed collateral.
Microfinance institutions (e.g., FINCA Uganda, VisionFund) cater to smallholders with loans up to UGX 13.5 million, often with grace periods (e.g., 2 months) and repayment flexibility. However, these institutions are less capitalized, limiting their scale.
Challenges with Loan Terms.
Most loans from commercial banks require repayment within 12 months, which is often misaligned with agricultural cycles, especially for crops with longer gestation periods. High interest rates (averaging 18.6% in 2023) and stringent collateral requirements further deter smallholder participation.
- Policy Gaps and Challenges
Risk Perception: Banks view agriculture as risky due to reliance on rain-fed farming, climate variability, and unpredictable cash flows, pushing smallholders toward informal credit markets or less-regulated Tier IV institutions (e.g., SACCOs, microfinance).
- Limited Outreach
Commercial banks focus on urban areas and large-scale farmers, leaving rural smallholders underserved. The 2022 Agricultural Finance Yearbook noted that stringent loan requirements and limited branch networks exacerbate this gap.
- Structural Issues:
Despite government efforts to de-risk agriculture (e.g., through agricultural insurance schemes), uptake remains low, and tax policies discourage leasing arrangements, which could ease equipment access.
Emerging Trends and Outlook.
Oil Revenue Potential: With oil production expected to start in late 2025, projected revenues could bolster agricultural financing if allocated to productive sectors, as suggested by the African Development Bank (AfDB). The economy is forecasted to grow by 7.0% in 2025, potentially increasing fiscal space for such investments.
Policy Recommendations: Experts, including the Economic Policy Research Centre (EPRC), advocate for an agricultural finance policy to realign commercial bank lending toward smallholders, enhance insurance schemes, and integrate Tier IV institutions into formal credit systems.
In conclusion.
Uganda’s agriculture, a cornerstone of its economy, relies heavily on smallholder farmers, yet access to affordable loans remains a challenge. Programs like the Agricultural Credit Facility (ACF) and Parish Development Model (PDM) offer support, but high interest rates and limited formal credit access persist. While the Uganda Development Bank (UDB) aids larger-scale farming, smallholders are often left underserved, turning to informal credit sources.
https://presidentialinitiatives.go.ug/: HARVESTING HOPE: THE STATE OF FARMER LOANS IN UGANDA AND THE PATH FORWARD FOR YOUNG FARMERSPath to Improvement
A more inclusive approach is needed, with tailored loan products featuring lower rates and flexible terms for smallholders. Leveraging digital innovations and future oil revenues, expected by late 2025, could transform the sector. By addressing these gaps, Uganda can empower farmers, boost food security, and foster sustainable growth.
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So development to people from poor background in terms of faninace ,to state up business and farming as abusiness
yess that is right