Digital financing is one way that has been identified by the government through the Uganda Development Bank to reach out to the unbanked populations especially in the agriculture sector to uplift their livelihoods.
Figures show that 66% of Ugandan adults are estimated to have access to an account. However, 77% of Ugandans borrow money and only 31% borrow from a formal financial institution.
It is against this background the Uganda Development Bank working with fintech companies and other sector players has decided to take on digitized financial services to increase the number of smallholder farmers in the remote areas accessing formal borrowing to improve productivity.
Since smallholder farmers are top on the list of those excluded from access to formal borrowing which undermine agricultural productivity.
Now in response to the limited access to financial services, the Uganda Development Bank working with Ensibuko, a Fintech company and other development partners has launched Uganda’s first ever digital agricultural loan for saving groups to smallholder farmers in West Nile.
Patricia Ojangole, the Executive Director a Uganda Development Bank notes that the fintech solution dubbed AgriConnect aims at disseminating credit to populations underserved by banks, most of whom work and rely on their village saving and loan schemes.
“Together with our partners, we have unveiled an innovative Fintech solution aimed at disseminating credit to the mass lower underserved markets consequently driving financial and digital inclusion.” -says Onjagole
The new solution launched in Yumbe district includes a digitized platform containing a record of past Village Saving and Loan Association transactions which allows the technology provider to define the right loan amount and reduce the lending risk for the financial institution and the risk of over borrowing.
According to Ojangole, the pilot project targets to reach at least 1000 small holder farmers to access digital loans to increase production, intensify food security and boost household incomes.
“The world is fast evolving as a result of advancements in technology, and it is key that as a development finance partner, we recognize such changes and make deliberate efforts to back inventions that influence the growth of key sectors of the economy like Agriculture, which employs 68% of the country’s population.” She adds
Applauding UDB and the partners for this technological innovation, Evelyn Anite the State Minister of Finance for Investment and Privatization, expressed optimism that this AgriConnect will reinvigorate and reshape Uganda.
She reveals that the digital economy contributes 70% to the economic growth of the National Gross Domestic Product and so this product is timely.
“Over the last few decades, digitalization has transformed the way of life world-over, causing varied social and economic changes. Likewise, in Uganda, digitalization continues to take root in shaping various sectors, and specifically the financial services. This indeed is a timely product for Uganda,” says Anite.
Dr Antonio Querido, the Food and Agriculture Organization (FAO), Country Representative in Uganda said AgriConnect will enhance the agriculture sector and improve farmer livelihoods in Uganda.
Querido hopes that the pilot solution will boost sustainable private investments in the agrifood sector and improve farmers’ access to digital credit.
“FAO believes that public funding alone is not enough to tackle the world’s most pressing sustainable development challenges – from ending poverty and hunger by 2030 to reducing inequalities. Private investments that generate social or environmental benefits alongside returns can help fill those investment gaps”-Querido notes.
Learnings from the pilot will enable the implementers to scale the solution to impact more farmers with a target of 18,000 at full cycle.
“The event is special in two ways: It is the launch of Uganda’s first ever digital agricultural loan for savings groups, it is also the first-ever launch of a strategic partnership between the Uganda Development Bank and a Ugandan fintech. Such purposeful collaborations are important for financial inclusion and will go a long way in validating the maturity of Uganda’s fintech landscape,” says Gerald Otim, Chief Executive Officer at Ensibuuko.
Uganda’s scope of financial services encompassed by Fintech has steadily been increasing and this has been necessitated by network readiness, digital literacy, and mobile phone penetration.