Hardships in securing farm loans – About Your Online Magazine

By Michael J Ssali

Even though our politicians talk a lot about the importance of agriculture in the national economy, not much effort is made to persuade financial institutions to offer equitable credit to farmers.

Agriculture is still considered very risky and low-paid by most money lending institutions. It is also true that most financial institutions do not have sufficient knowledge about how farmers conduct their business.

For example, last October, a coffee farmer in the Lwengo district sought and obtained a loan from a bank that will remain anonymous in today’s column. He needed the money to buy fertilizer and he intended to pay it back in June, after the coffee harvest.

However, the terms of the bank’s loan were that the first installment was due in mid-April this year and the rest was due in October. Due to the urgent need for fertilizers, he agreed to the terms and accepted the money anyway.

April has arrived and almost all the trees on the farmer’s coffee plantation are loaded with coffee beans. But, as everyone knows, the coffee harvest season across the Masaka region, where the Lwengo district is located, is between May and July.

The farmer cannot harvest his coffee in April, when he is obliged to pay the first installment, as it is still green. Still, in June, he hopes to earn eight times as much money as he borrowed from the bank.
In fact, his intention is to have the entire loan paid off by the end of June, although the bank has defined October as the time to terminate the loan.


In order to repay the first installment of the loan due in April, the farmer is now negotiating with a local coffee merchant to advance him some money that the merchant will deduct from the farmer’s coffee sales in May or June.
Commercial banks are still not really friendly to farmers and set difficult conditions for granting their loans.

They generally lend with guarantee of land titles and commercial buildings, and even so, they decide the periods in which the farmer must repay the borrowed money.

Mr. Michael Ssali is a veteran journalist,

Paula Fonseca