By Mulengera Reporters
The Agricultural Credit Facility (ACF) has recovered Shs335.12 billion from loans disbursed to participating financial institutions, reinforcing the financial sustainability of the Bank of Uganda-managed agricultural financing programme.
By June 2024, the Government of Uganda, through BoU, had disbursed Shs495.62 billion to participating financial institutions (PFIs), with cumulative recoveries reaching Shs335.12 billion, equivalent to a 68% recovery rate.
The outstanding balance stood at Shs160.5 billion, according to an independent evaluation by the National Planning Authority (NPA), commissioned by the Ministry of Finance, Planning and Economic Development and released in May 2026.
The strong recovery performance reflects adherence to repayment obligations by borrowers and the role of PFIs in monitoring and collecting loan repayments, the evaluation says.
The facility’s non-performing loan (NPL) position is also notably low.
ACF’s NPL ratio stood at just 1.2%, well below the 5% NPL target set by BoU and below the broader banking sector averages cited in the evaluation.
The low level of non-performing loans points to prudent credit management and effective oversight by PFIs, helping protect the revolving pool of funds that allows the ACF to continue supporting agricultural enterprises.
However, the evaluation says the exceptionally low default rate also raises a different question about the type of borrowers benefiting from the facility.
A very low NPL ratio may indicate that PFIs are concentrating lending on borrowers considered relatively safe and commercially viable.
This could mean that some ACF-backed borrowers would have been able to obtain agricultural credit even without the facility’s concessional financing.
For a development financing mechanism, the NPA says, financial sustainability needs to be balanced with development additionality — reaching borrowers who face greater difficulty accessing conventional credit.
The evaluation identifies smallholder farmers, youth and first-time borrowers among the groups that may require greater attention because of structural barriers to accessing commercial finance.
Expanding access to such borrowers could increase the ACF’s counterfactual impact — the difference the facility makes compared with what would have happened without its support.
The evaluation also identifies an opportunity to strengthen BoU’s visibility over loan recovery performance.
Under the current arrangement, PFIs are responsible for originating, assessing and collecting ACF loans, while they remit 50% of the principal corresponding to BoU’s original contribution twice a year, in June and December.
The NPA says ACF’s visibility into recovery performance is therefore largely limited to these biannual reconciliations.
It recommends a standardised reporting framework requiring PFIs to submit quarterly loan-performance reports, supported by key performance indicators.
The facility should also establish performance thresholds that trigger joint reviews with PFIs whose portfolios show signs of deteriorating performance.
Such a system would allow repayment risks to be identified earlier rather than waiting for scheduled reconciliation periods.
The evaluation simultaneously calls for a recalibration of ACF’s lending strategy to expand financing to higher-risk but underserved groups.
This could include greater use of block allocation products, adjusted risk tolerance and tailored financial instruments with appropriate risk-sharing mechanisms.
The NPA argues that taking a measured approach to higher-risk segments would allow ACF to preserve its strong financial performance while increasing its development impact.
The evaluation also recommends strengthening borrower support before and after loans are issued.
Although BoU has made efforts to publicise the ACF through mass media, the facility does not have a dedicated mechanism for providing direct advisory support to prospective borrowers.
Instead, advisory assistance is largely left to PFIs, whose primary lending operations are commercially driven.
The NPA says this can disadvantage SMEs, youth and women-led enterprises that may struggle with financial literacy, proposal preparation or meeting conventional lending requirements.
It recommends establishing a dedicated, neutral advisory mechanism under the ACF, either through a central advisory unit or regional outreach officers working alongside PFIs.
The service would provide pre-application guidance, financial literacy and project-development support, helping prospective borrowers prepare stronger applications and improve their chances of accessing financing.
The combination of strong loan recovery and targeted borrower support, the evaluation says, would allow the ACF to build on its financial discipline while extending its reach to groups that are less likely to secure commercial credit.
For BoU, the findings present an opportunity to leverage the facility’s 68% recovery performance and 1.2% NPL ratio as a foundation for cautiously expanding its development reach.
The NPA’s central message is that financial sustainability and greater inclusion do not have to be competing objectives: a stronger recovery and monitoring framework can give the ACF room to take carefully managed risks in segments where agricultural finance is most needed. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
