A bird’s view over large parts of northern Uganda that a few years ago were abandoned farmlands due to insurgency in the region now shows swathes of land sprawling into a continuous sea of yellow during the sunflower blossoming season.
While Ugandan manufacturing giant Mukwano Group owns whole chunks of the sunflower farms in the country’s north (mainly the Lango sub-region) many smallholder farmers, including women groups have trained and are now engaged in sunflower farming and other agribusiness ventures across the crop’s value chain.
But sunflower under the oil seeds value chain is one of six crops besides coffee, Cereal (maize and rice), Pulses (beans), dairy in South Western Uganda and horticulture for export that have since 2010 rekindled interest in agriculture as a business sector countrywide, with the support of the Agricultural Business Initiative Trust – commonly referred to as aBi Trust.
Other aBi supported areas are the agribusiness financing through Lines of Credit, Agribusiness Loan Guarantee and Construction Guarantee fund under aBi Finance not to mention Financial Services Development.
In less than four years of implementation, aBi Trust interventions – through grants to provide technical support to financial institutions – have yielded results for farmers and enterprises engaged in the crops’ value chain.
The results include more jobs created, increased incomes for farmers, changes in the yield and cost of production, ease of access to credit, new marketing approaches and training in use of good agricultural practices, but research findings show that there is still hunger for more agribusiness finance among to support ventures across more commodities.
“Average incomes of farmers increased significantly in the beef cattle, dairy and sugar cane enterprises after they received aBi Finance-guaranteed loans. However the unmet demand for finance by agricultural enterprises underscores the need for expanding the aBi Finance programmes to increase geographical coverage and the number of supported commodities and supported farmers,” says a 2013 aBi Impact Assessment Report, spanning the period 2010-13.
The report concludes that this way, aBi Trust would build a self-sustaining, export led economy for Uganda, whose majority population is agriculture oriented yet contributing to less in transforming the economy.
According to the 2012/13 Uganda National Household Survey (UNHS), 80 per cent of Uganda’s total labour force remains predominantly self-employed, with the majority of up to 72 per cent in the agriculture sector overall, and an estimated 66 per cent engaged in agribusiness.
Uganda’s population – currently estimated to be 37 million and projected to hit the 100 million mark by 2050 – also continues to grow, raising increased demand for food, whose production has been declining over the last decade. The upshot is an urgent need for investment in modernisation of the agriculture sector, which places extra demand for policy actions that not only increase activities and services for the labour force but significantly, access to financing that is key to unlocking the sector to ensure food security, contribute more the country’s GDP and transform the economy.
But with government’s support to and investment in agriculture still below five per cent of the entire budget, the aBi programme has come in handy to make inroads in supporting the private sector’s small and medium enterprises and farmers to raise incomes at household level and ultimately, the country’s economic growth.
In 2010, the governments of Denmark and Uganda jointly, founded the aBi Group – comprising of the Trust and a Financing arm to address challenges of low productivity of Uganda’s agriculture sector. Other development partners include USAID, Sweden, Belgium, Netherlands, UKAid, and KfW.
The Group follows a long-term commitment as both a catalyst in support of the Ugandan agricultural sector and a conduit through which development partners and investors can build the capacity of the sector.
Oil seeds yields and revenue
Under the sunflower value chain, yields more than doubled from 300kg per acre in 2011 to 700kg per acre in 2013, attributed partly to the adoption rate of 45 per cent of good agricultural practice, better post-harvest handling and use of improved seed varieties coupled with quality improvements in the sunflower products. This attracted a price of Ush1000 per kg for farmer groups who sold collectively compared to famers that sold individually, who received Ush200 less.
Meanwhile in 2013, soybean farmers collectively sold a total of 486 metric tonnes at Ush800 per kg to buyers and made additional revenue of Ush1.3 million per farmer up from Ush0.96 million per farmer the previous year after increasing their average yield per acre by 40 per cent from 500kg per acre in 2011. The windfall from the produce was accompanied with an 80 per cent adoption rate of recommended soybean agronomic practices.
The same value chain beneficiary farmers collectively sold 1,107 metric tonnes of sesame at an average price of Ush 3000 per kg in 2013 compared to Ush2400 per kg in 2012. The result was total revenue of Ush15.2 billion for 12,684 farmers – translating on average to revenue of Ush1.2 million per farmer. Average yield increased from 150kg per acre in 2011 to 400kg in 2013.
Overall, across the featured value chain commodities, including coffee, the farmers grew their incomes, a development that aBi researchers attribute to adoption of good agricultural practices such as use of improved seeds that they could only afford with aBi financing. In addition, the farmers used animal manure, mulching and better crop spacing.
Through its finance partner institutions, aBi extended grants to train farmers, buy farm inputs and post-harvest handling equipment. Most farmers sampled in aBi Impact Assessment Report received funding through Centenary Bank, Opportunity Bank, Ugafode and FINCA.
According to Bank of Uganda, the overall agricultural lending portfolio rose steadily at an average annual rate of 20 per cent from Ush400 billion in 2010 to Ush700 billion in 2013 with aBi Finance supported loans accounting for 22 per cent of this portfolio.
Centenary Bank, one of the aBi finance partners, accounts for 17 per cent of the overall agricultural lending in the country; the bank nearly doubled its agricultural lending portfolio from Ush69 billion in 2010 to Ush114 billion in 2013. In Ugafode – another aBi financial partner – aBi finance-supported loans account for about 20 per cent of the total agriculture loan portfolio.
By 2013, Lines of Credit worth Ush88 billion had been extended to 32,788 clients – approximately 6.3 per cent less than the expected coverage of 35000 enterprises by 2013. Centenary bank accounts for nearly half of the value of the credit line extended under aBi finance programmes. Furthermore, the share of female beneficiaries is only 34 per cent, which is slightly below the target rate of 40 per cent.
The volume of loans disbursed under the agricultural loan guarantee scheme has grown significantly, rising from 4,000 in 2010 to 10,000 by 2013. The total amount of outstanding loans underwritten by the programme increased from Ush8.3 billion in 2010 to Ush40.9 billion at end of 2013