When covid-19 broke out in Uganda, its impact was mainly felt economically since most businesses were affected and many of those who were thriving on loans closed down.
In the same line, financial institutions that were giving out loans also suffered since most of the loans they gave out were not paid thus weakening their lending power.
However, as a way of re-energizing small financial institutions, AgricBusiness Initiative (aBi) has offered support to partners as a way of minimizing business disruption and ensuring business continuity.
Speaking at the stakeholders’ event on Thursday at Golden Tulip Hotel, aBi’s Product Manager Financial Development, Irene Sekamwa said they offered all their financial institutions partners a grace period of 12 months without repayment on both principal and interest to support their liquidity base and recover from the impact of Covid-19.
“We also reduced our interest rates by about 5 per cent from an average of 13 per cent to the lowest we could go about 8 per cent. This was also in a move to support institutions to have some working stability. In turn, we also requested our partner institutions to pass on these concessions to their clients, we did this to several SACCOs where some interest was reduced from 3 per cent per month to 2 per cent per month.”
Ms Sekamwa added that aBi has also offered short term Covid-19 relief working capital that was intended to refinance struggling businesses affected by covid-19.
“To restart or stimulate the re-start of the economy from covid-19, Stanbic Bank by virtual of their convening power indicated the fund ‘the economic Enterprise Restart Fund’ and in that regard, we are partnering with them and to ensure the availability of the affordable cost of funds we have provided a line of credit worth Shs20bn through Stanbic bank at a concessional rate of 5 per cent to SACCOS and Micro-financial institutions.”
To stimulate Stanbic’s appetite in lending the Agric business sector through the SACCOs and MFIs, aBi has since provided a guarantee cover of Shs20bn through Stanbic bank but with the possibility of increasing it to Shs45bn in respect of loans advanced for agro-business purposes.
In this regard aBi will take a risk share of 50 per cent from the defaulted loan principals, of course after proving that all reasonable collection efforts have been diligently persuaded against the recovering borrowers in accordance laws and standards in Uganda.
aBi also asked their partners to use digital channels to affect their operations and also deliver financial services and in this regard, a fund of Shs2bn has been put in place to allow financial institutions to digitize their services.
“With digitization, we are confident that financial service delivery will be very efficient, especially in rural areas.”
The Acting Executive Director of Financial Sector Deepening Uganda, Joseph Lutwama noted that if the financial institutions embrace digitization their services will benefit many.
“If Financial Institutions embrace digital initiatives, they will bring together the smallholder guys and SMEs into the digital economy to support them and be able to get used to the economy. Most smallholder farmers and SMEs suffered a lot due to covid-19 and when such financial assistances are given to some financial institutions and SACCOs which support farmers there is always a hope for reviving those small businesses that were affected by Covid-19.”
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