Previously, European Union member countries invested in private companies through the European Investment Bank. In a sign of a change in strategy, this week the European Union stepped forward with a US$8.7 million package to take up a stake, in addition to US$9M from the Danish Investment Fund for Developing Countries, in aBi Finance Ltd as investors.
A ceremony to welcome the new shareholders was marked with the signing of the US$ 17.7 million partnership between the European Union, the Danish Investment Fund for Developing Countries as well as the Agricultural Business Initiative, the parent company of aBi Finance limited.
Agricultural Business Initiative (ABI) is a joint undertaking between the Government of Uganda and the Danish government to promote investments in agricultural value chain development.
Under the new partnership, aBi Finance Limited will transition from a company limited by guarantee to a company limited by shares and will operate on a commercial basis and attract more investors.
Speaking at the signing ceremony in Kampala, Mona Sebuliba, the Chief Executive Officer aBi Finance limited pointed out that many of the financial institutions avoid financing agriculture because of the risks attributed to the vagaries of climate change which leave many farmers with no access to credit.
She noted that with the coming on board of new shareholders, aBi, working with its partners in the financial sector, shall scale up the financial support to more farmers facing limited access to credit for their agricultural business.
“With the acquisition of new investments, aBi Finance has demonstrated that it is a sustainable and professionally run organization that can and will continue to attract foreign direct investment. We are confident that this investment will add to our past and ongoing initiatives to develop a competitive, profitable and sustainable agribusiness sector in Uganda” said Mona Muguma-Ssebuliba, aBi CEO.
Receiving the UGX65 billion additional funding brings the aBi Finance capital fund to UGX 200bn, a decent war chest to ensure that the company’s partner Financial Institutions are equipped with appropriate financing and capacity to finance climate adaptation and climate mitigation interventions.
Ssebuliba further defined the interventions as climate adaptation products which tend to be working capital in nature and finance things like drought resistant seeds, flood tolerant seeds, disease and pest resistant seeds, irrigation equipment, organic inputs while climate mitigation financing tends to be capital intensive in nature like bio digesters, effluent treatment plants and the like.
Further responding to the interests and emphasis from the new shareholders of Green investments (to address Climate Change Challenges), Ssebuliba revealed that next month of July 2022, aBi will be launching a Green Challenge Fund to enable farmers and agribusinesses to be resilient and adapt to climate change.
She added that the signed agreement is critical for the country that is recovering from the Covid19 pandemic; it is expected to benefit 27,000 new beneficiary clients and create UGX14.5 billion of additional income and 900 additional jobs annually.
Representing the Head of European Union, Caroline Adriaensen said that through this additional injection of capital, aBi will be able to reach more smallholder farmers in Uganda with better products, adapted to their needs to address poverty.
“The EU is delighted to join hands with the Danish Investment Fund for Developing Countries (IFU) to de-risk their investment in the Agricultural Business Initiative (aBi) in a true Team Europe approach. We are convinced that through this additional injection of capital, aBi will be able to reach more smallholder farmers in Uganda with better products, adapted to their needs. Access to finance will have a positive impact on their small businesses and pull many out of poverty” said European Union Head of Co-operation, Caroline Adriaensen
According to the aBi Communication Officer George Mutagubya, banks and other financial institutions working with aBi Finance Limited will get more funds at a lower interest rate which is around 6-7% to enable them to give loans to farmers and those operating in agribusiness.
Mutagubya stressed that many financial institutions avoid agriculture-related loans because of the high risk involved in agricultural ventures therefore denying farmers access to credit. He added that to further reduce the risk aBi offers loan insurance to the financial institutions of up to 50% as a way of encouraging the institutions to give credit to farmers and those in Agribusiness.
Commercial banks, Microfinance institutions and SACCOs like Centenary Bank, BRAC, UGAFODE, Talanta SACCO, Rukiga SACCO among others partners, aBi Finance Limited has managed to reach out to the smallholder farmers.
aBi Finance limited in the past 12 years partnered with and worked with 28 Financial Institutions and 1.4 million small holder farmers and agribusinesses, of whom 30% are women, have received agribusiness financing to the tune of UGX 3.5 trillion.