Uganda has signed a financing agreement to have affordable credit extended to rural households.
The agreement, signed with the International Fund for Agricultural Development (IFAD) last week, will see Uganda get a $29m (Shs 78bn) loan to finance the Project for Financial Inclusion in Rural Areas (PROFIRA). The project intends to increase access to and use of financial services by rural populations in Uganda, said the IFAD press statement.
The total cost of the project is $36.6m, where the project is co-financed with a $4.9m contribution from the Uganda government and the balance from the beneficiaries themselves, according to the statement. The money will be passed through community-based savings and credit groups.
“The supply of financial services to rural areas in Uganda is still very limited, falling significantly short of demand,” said Michel Mordasini, the vice president of IFAD.
The financing agreement was signed in Rome by Grace Dinah Akello, the ambassador and permanent representative of Uganda, and Mordasini. PROFIRA targets some 576,000 financially excluded rural households, particularly women and young people, to improve their economic activities and livelihoods. The regions where the project will operate are yet to be chosen.
The project also intends to develop the capacity of rural dwellers to save. Consequently, the press statement said, the project will focus on increasing agricultural income through providing improved inputs and other means of production.
Many commercial banks in Uganda consider rural households too risky to lend to, especially those engaged in agriculture. PROFIRA wants to build confidence in local Saccos, which know the village communities far better than banks. Also, the cost of loans in many commercial banks, averaging at 21.6 per cent, is considered too high for the farmers to access.
The seven-year project will be managed by Uganda’s ministry of Finance. By the time it folds, according to IFAD, it is expected to help increase the income of the project participants, improve food and nutrition security and reduce vulnerability of the rural communities of the country, according to the statement.
Since 1982, IFAD says it has invested a total of $325.5m in 15 programmes and projects in Uganda. It is estimated that nearly five million Ugandan rural households have benefitted from these investments.
Source : The Observer