PostBank Uganda’s agricultural loan book has experienced remarkable growth, increasing by 70% over a four-year period, from Ushs. 107 billion in 2021 to an impressive 70% growth rate by June 2024. This performance has been attributed to several factors, including favorable lending rates, government support, and other strategic initiatives.
The agricultural sector in Uganda features a robust value chain that spans from production to final consumer, necessitating access to affordable financing at various stages. Agricultural loans have become one of the best-performing products in the banking sector, given the large number of individuals and entities involved in different phases of production.
These loans are designed to finance legal agricultural undertakings across the value chain, including production, processing, and marketing, and are applicable to both individual and non-individual entities. According to the Uganda Bureau of Statistics (UBOS), about 68% of Uganda’s working population is employed in agriculture, which produces a wide range of products including coffee, livestock, maize, tea, sugarcane, and more. In the 2022/23 financial year, agriculture accounted for about 24% of GDP and 35% of export earnings.
Julius Akais, Supervisor of Agriculture and Partnerships at PostBank Uganda, commented on the bank’s commitment to supporting Ugandans’ prosperity by designing affordable products that address customer demands at different agricultural production phases. This commitment, Akais noted, has driven the bank’s loan book growth by 70% over the past four years.
Akais attributed this growth to several factors, including targeted financial products for specific value chains such as coffee, poultry, cattle keeping, and grain trade (maize). Additionally, well-structured agricultural loans that match business cycles, financial literacy programs, enhanced outreach through rural branches and mobile banking services, and government support have all contributed to this success.
One notable initiative under PostBank’s Agric-SME Development Programme involved conducting financial literacy training with over 150 cassava farmers in Arua District in partnership with the Federation of Small and Medium Sized Enterprises (FMSE). This program, along with the Agricultural Credit Facility loans offered by PostBank at interest rates as low as 12% per annum, underscores the government’s commitment to supporting the commercialization of agriculture.
The bank’s strong relationships with agricultural stakeholders and partners such as ACELI Africa, aBi Development Limited, and insurance partners through bancassurance products have also played a significant role. Furthermore, the adoption of technology in banking services, including mobile banking and online platforms, has made it easier for agricultural clients to access financial products.
“Commercialization of the sector through financing will continue to play a critical role in increasing the sector’s performance. Those actively involved in the agriculture value chain will have the financial muscle to produce quality products, enabling them to trade within the country as well as export surplus to the region,” Mr. Akais concluded.
