The Agricultural Credit Facility (ACF) was set up by the Government of Uganda (GoU) in partnership with Commercial Banks, Uganda Development Bank Ltd (UDBL), Micro Deposit Taking Institutions (MDIs) and Credit Institutions all referred to as Participating Financial Institutions (PFIs). The Scheme’s operations started in October 2009, with the aim of facilitating the provision of medium and long term financing to projects engaged in Agriculture and Agro processing, focusing mainly on commercialization and value addition.
Loans under the ACF are disbursed to farmers and agro-processors through the PFIs at more favorable terms than are usually available under conventional loans. The scheme is administered by the Bank of Uganda (BoU) and its operations are guided by the Memorandum of Understanding (MoU) signed by all the stakeholders. The GoU is represented by the Ministry of Finance, Planning and Economic Development (MFPED). The scheme operates on a refinance basis in that the PFIs disburse all the loan amount required by a client and seek for a re-imbursement from BoU.
Eligible projects include acquisition of agricultural machinery, post harvest handling equipment, storage facilities, agro processing, mechanization and any other related agricultural and agro-processing machinery and equipment. Agricultural inputs required for primary production and working capital requirements are considered provided this component does not exceed 20% of the total project cost for each eligible borrower. The scheme also provides financing for Working capital and infrastructure for projects engaged in grain trading.
Sub-loan amounts are determined on the basis of assessment and appraisal of project costs and genuine credit needs in accordance with the lending policy of the PFI and the ACF Memorandum of Understanding. The loans are designated in Uganda shillings. The PFIs disburse the total loan amount (100%) to the final borrower (Sub-borrower) on the following terms:
The maximum loan amount to a single borrower is up to Shs.2.1billion. However, this amount can be increased up to Shs.5billion on a case by case basis (for eligible projects that add significant value to the Agriculture sector and the economy as a whole). There is no designated minimum loan amount to the final beneficiary (farmer/ agro-processor) but BoU can only reimburse a minimum of Shs 10million to the PFIs.
ii Loan Tenure
The maximum loan period should not exceed 8 years and the minimum should be 6 months.
The Grace Period is up to a maximum of 3 years.
The interest rate to the final borrower is up to a maximum of 12% per annum. The 50% GoU contribution is disbursed to the PFIs at zero
Interest (interest free).
Loan processing fees charged by PFIs to eligible borrowers should not exceed 0.5% of the total loan amount. Legal documentation and registration costs are borne by the borrower.
The main objective of the ACF is to promote commercialization of Agriculture through provision of medium and long term financing to projects engaged in agriculture, agro processing, modernization and mechanization.
The Scheme shall not be used for financing working capital for purchase of land, forestry, refinancing existing loan facilities and trading in agricultural commodities with the exception of grain.
The primary security for the credit facilities is the machinery and equipment financed, where applicable, and any other marketable securities provided by the borrower/final beneficiary. PFIs may seek additional security based on their evaluation of the risk profile of the project being financed.
The PFIs shall ensure that the loan is adequately secured as per their credit policy to protect their interest and that of the BoU and the GoU.
The scheme shall also provide financing for Working capital and infrastructure for projects engaged in grain trading. The terms will be as follows: