New Investment gives small farmers in Uganda access to financing
13-06-2022 12:17:42 | by: Marlene Mutimawase | hits: 2693 | Tags:

In Uganda, the agricultural sector is crucial for development, accounting for 70% of employment and 60% of the country's export earnings. But the growth potential is hampered by a lack of access to financial services, not least for smallholder farmers in rural areas.

To improve access to financial services and increase financial inclusion in Uganda, Danida established aBi Finance more than 12 years ago. aBi Finance provides agricultural financing via credits and loan guarantees to financial institutions.

To take aBi Finance to the next level, IFU and the EU are investing USD 18 million. in share capital. The investment will increase the company's capacity and is expected to generate additional revenue of $ 4 million annually, 900 new jobs per year and increase the number of customers by 27,000.

“The investment in aBi Finance provides good opportunities to increase access to financial services for small farmers in rural areas and provide more opportunities to expand their production and improve their living conditions. However, in order to create a solid business case in which IFU could invest on commercial terms, concessional financing was necessary. We have ensured this by investing together with the EU's Blended Finance Facilities. ”Said Anders Frigaard, Senior Investment Manager at IFU.

“After more than 12 years of involvement in aBi Finance, we are pleased that the fund can now be further commercialized. This will make aBi Finance much stronger. The new investments from IFU and the EU ensure that aBi Finance can continue to support small farmers and agricultural businesses in Uganda. This involvement has been and will continue to be very important for the work of the Danish Embassy, ”said Denmark's Ambassador to Uganda, Nicolaj A. Hejberg Petersen.

There is a high risk associated with offering financial services to farmers in Uganda, and therefore IFU has approached the EU with a view to obtaining co-financing through the EU's Blended Finance Facilities.

The EU's Blended Finance Facilities was established to mobilize funding for private sector development through various financial instruments and funding classes.

"The EU is pleased to join forces with IFU to minimize the risk of their investment in the Agricultural Business Initiative (aBi). We are convinced that with this extra capital injection, aBi Finance will be able to reach more small farmers in Uganda with better financial products tailored to their needs. Access to finance will have a positive impact on their small businesses and help many out of poverty. ” declared by Caroline Adriaensen, European Union Head of Co-operation.

IFU is the first commercial investor in aBi Finance, and the goal is to make the company a profitable business that can continue to grow and have a major impact in Uganda.

“With the addition of the new investments, aBi Finance has shown that it is a strong and professionally run organization that can and will continue to attract foreign investment. We are confident that this investment will complement our past and future initiatives to develop a competitive, profitable and strong agricultural sector in Uganda, said Mona Muguma-Ssebuliba, CEO of aBi.

Agricultural Business Initiative Finance (aBi Finance)
Since 2010, aBi Finance Ltd has, on a sustainable basis, encouraged growth among players in the agricultural sector's value chain. It has been implemented by stimulating access to finance by providing liquidity, minimizing the risk of financing agriculture and building the capacity of financial actors to provide financial services to agricultural holdings. In the period 2010/2021, aBi Finance Ltd has reached the following milestones:

  • paid out a total of 1.4 million. new loans worth UGX 3.5 trillion
  • the size of the private equity fund (UGX 177 billion).
  • number of credit recipients (425,000)
  • number of recipients of agricultural guarantees (191,000)
  • number of farmers having access to agricultural insurance (240,000)

Prior to this capital injection from IFU and the EU, the private equity fund had a size of more than USD 50 million. (approx. UGX 200 billion) with an average return of 10%. The fund's assets are invested in credit lines, loan guarantee schemes and fixed deposit