In 2020, Stanley Ssebunya, a forester in Mukono district, attempted to secure a loan from a few banking institutions to grow his farm.
However, he was turned away, with many claiming that agroforestry was a long-term enterprise so financing it would mean he was going to wait for many years to benefit from it and pay up.
Bank officials added that it was a gamble to finance an enterprise that depended on the weather given its unpredictability. Some that were willing wanted him to give them his land title as security, which he was not comfortable with.
As Ssebunya pondered his next step, a friend who had secured a loan from an institution that had an agricultural loan component took him there and he was able to secure a loan worth sh10m, which he used to build a screen house for clonal eucalyptus seedlings and bought herbicides as well as seeds.
Part of the loan went into paying workers, among others. He was also given a grace period that was tailored to the enterprise he was engaged in.
He adds that before he was given the loan, the bank trained him on how to use it by not diverting it to other enterprises that were not indicated in the loan application.
James Sezibera, is a cattle farmer from Kizaaro village Lugusolo sub-county in Sembabule district. He started farming in 1991 and he was rearing cows on zero-grazing.
However, he wanted to improve his farming by fencing and paddocking his land. When he brought an expert, he was told that he needed over sh30m to fence up all his land.
Like Ssebunya, he also approached different banks, but they were not willing to give him a loan for fencing.
However, in 2000 he was advised by a friend that there are financial institutions that loaned to farmers. When he visited one of them, indeed they loaned him sh30m, which he used to put up a fence around his land.
After paying back, he also decided to start growing coffee and his land was located in a semi-arid area, he needed a stable water source.
So, he decided to get a sh10m loan from the same institution. He used the money to construct a valley dam which is used for both irrigation and animals for drinking water.
He has planted six acres of coffee and he now has a steady supply of water for irrigation.
“I also borrowed sh50m, money I used to buy more young male calves that I am fattening. I have over 600 bulls fattening and I expect to sell each at sh5m. The cows are for beef,” he says.
He also borrowed more money which he used to start goat earing and to date, he has more than 500 goats on his farm. He also borrows money that he uses to buy drugs for treating the animals.
Evelyn Njereyo, the Vision Fund Uganda regional manager for West Nile, says there are many financial institutions that offer agricultural loans to farmers, but the problem is that farmers are not aware of them.
She says it is because they do not do research.
Njereyo also emphasises that even the loans they give are to specific farming enterprises so one has to first find out which venture the institution is willing to give a loan for.
“Many even institutions fear to give these loans because some farmers borrow and they use the money for other things. Hence, asking for security is one way of securing the loan,” she says.
Njereyo advises that farmers that before they go for that loan, first they should know what they want to invest in, is it short or long-term, is it profitable or not, will it bring back the money invested in or not?
Will you be able to pay back the money or not, what are the terms and conditions for the loan, what is the grace period for paying back the loan, among others.
And when you get the loan, immediately go and use the money for what you have borrowed it for. Do not keep the money in the house until it is diverted to other issues.
“Remember its money meant to be paid back so, ensure that it is used well to avoid clashing with the financial institutions. And when they agreed period for payment reaches, never default lest you risk not getting another loan again,” Njereyo advises.
