By Mulengera Reporters
The Bank of Uganda-managed Agricultural Credit Facility (ACF) maintained a strong flow of financing to borrowers in 2024, disbursing 60% of the total value of loan applications, despite a significant tightening in the number of applications approved, an independent evaluation has found.
The value of loans disbursed stood at 60% of the total value applied for in 2024, only three percentage points below the 63% recorded in 2021, according to the National Planning Authority (NPA) evaluation commissioned by the Ministry of Finance, Planning and Economic Development.
The relatively stable value-disbursement rate indicates that the facility continued to channel substantial amounts of credit into the agricultural sector even as participating financial institutions (PFIs) became more selective about the number of applications they approved.
The evaluation found that the proportion of applications approved fell from 82% in 2021 to 50% in 2024.
This means that while the ACF was approving fewer applications, the decline did not translate into a comparable reduction in the value of financing reaching borrowers.
The NPA says the divergence between approval volumes and disbursed values points to a shift towards fewer but potentially larger loans.
The trend could be linked to repeat lending, loan top-ups for existing borrowers or greater focus by PFIs on larger and more established enterprises.
From a portfolio management perspective, the shift could reflect more prudent lending practices and deeper engagement with borrowers who have established credit histories.
However, the evaluation cautions that the changing pattern also presents an emerging inclusion challenge.
As the facility processes fewer applications while maintaining relatively stable disbursement values, smaller and first-time borrowers could find it increasingly difficult to access ACF financing.
The groups potentially affected include smallholder farmers, youth and rural borrowers, who often require smaller loans and may have limited borrowing histories.
The evaluation says the declining approval rate could reflect either tighter lending standards or capacity constraints among PFIs.
To preserve the facility’s developmental reach, the NPA recommends measures to help new applicants become more credit-ready, including stronger financial literacy programmes and improved borrower onboarding.
It also calls for support to borrowers accessing ACF financing through micro-lenders and block allocation products.
The evaluation recommends that PFIs be assessed not only on the quality and value of their loan portfolios, but also on their ability to reach new and underserved borrowers.
It proposes inclusive performance indicators and differentiated lending targets that can encourage new-client acquisition without undermining portfolio quality.
The ACF should also regularly monitor the ratio of approved applications to total applications, both by number and by value, and track the performance across individual PFIs.
The NPA further recommends operational measures such as digitised loan-screening systems, simplified appraisal procedures for small loans and strategic use of guarantees to widen access while maintaining lending discipline.
The findings suggest that the ACF is entering a more mature phase in which the challenge is no longer simply maintaining the flow of agricultural credit, but balancing portfolio quality, loan size and financial sustainability with broad-based access.
For BoU and the PFIs, maintaining the relatively stable value of lending while expanding opportunities for first-time and smaller borrowers will be critical to ensuring that the facility continues to support the wider agricultural transformation and development objectives under Uganda’s Vision 2040. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
