UDB, Partners Launch Financial Technology Solution for Smallholder Farmers

Uganda Development Bank (UDB) partnered with Ensibuuko, European Union, United Nations Capital Development Fund (UNCDF), and Food and Agriculture Organization (FAO) to launch a Fintech solution dubbed AgriConnect to ease access to digital financing for smallholder farmers in Uganda.

The innovation, which will offer both savings and lending options for small-holder farmers in Uganda, will provide a platform for Village Saving and Loans Associations (VSLAs) to digitally access short-term seasonal loans and saving products at affordable rates to grow their businesses.

The entire lending process - application, approval, and disbursement - will be done digitally with the funds credited directly to the farmer’s e-mobile wallet. Speaking at the launch, Patricia Ojangole, the Managing Director of UDB said: “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.”

She added: “The world is fast evolving resultant of advancements in technology, and it is key that as a development finance partner, we recognize such changes and make a deliberate effort to back inventions that influence the growth of key sectors of the economy like Agriculture, which employs 68% of the country’s population.”

The pilot project targets to reach at least 1,000 smallholder farmers. The farmers will have access to digital loans to enable them to increase production, intensify food security, and boost the household incomes of the farming communities across Uganda. 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,” said Gerald Otim, CEO 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. According to World Bank, Uganda ranks 172nd on Gross National Income (GNI) and 116th on the Network Readiness Index (NRI), respectively.

The country’s Mobile penetration is at 49% and smartphone adoption is at 16%, all of which account for the contribution of the digital economy which contributes 7% to the economy. “Over the last few decades, digitalization has transformed the way of life the world over, causing varied social and economic changes. Likewise, in Uganda, digitalization continues to take root in shaping various sectors, specifically financial services. AgriConnect will reinvigorate and reshape our country Uganda. This indeed is a timely product for Uganda,” said Evelyn Anite, the state minister of Finance for Investment and Privatization.

“With services like this, Uganda is indeed on a good trajectory to achieve its goals as stipulated in the National Development Plan and Vision 2040.” Anite lauded UDB, FAO, UNCDF, EU and Ensibuuko for their critical role in the socio-economic transformation of Uganda and pledged the government’s continued support towards this agenda.

UNCDF reaffirmed its commitment to boosting financial inclusion in Uganda. “UNCDF has been involved in advancing access to finance through digital financial services in Uganda for the last seven years. We have seen solutions like digital payments and savings accounts grow significantly in various agri-value chains. The promise of digitalization unlocking financing for farmers still falls behind – yet it holds the greatest value proposition for them,” UNCDF Technical Advisor – Inclusive Digital Economy, Richard Ndahiro said.

“According to Findex 2021, digital financial services have enabled more Ugandans to access formal financial services. 66% of Ugandan adults are estimated to have access to an account. However, while 77% of Ugandans borrow money – only 31% borrow from a formal financial institution. Smallholder farmers are top of the list of those excluded from access to formal borrowing. The solution launched today leverages digital innovation to enable access to finance for farmers. This project is one of the ways UNCDF is working with partners and financial services providers to drive digital financial inclusion beyond payments.”

According to FAO, AgriConnect will enhance the agriculture sector and improve farmer livelihoods in Uganda. “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 that investment gaps. The pilot solution we are launching today is hoped to boost sustainable private investments in the agri-food sector and improve farmers’ access to digital credit,” said FAO’s Country Representative in Uganda, Dr. Antonio Querido.

The European Union expressed delight in the partnership mentioning that it will set the tone for further deeper and more sustainable collaboration in the future, benefitting underserved populations. Ojangole urged the smallholder farmers in Yumbe District and the neighboring areas to embrace this service which will boost their output and participation in agribusiness and called for more meaningful partnerships. “I would like to specifically thank our partners Ensibuuko, EU, FAO, and UNCDF for joining us on this journey that aims to transform communities through financial empowerment, which will in the long run boost the performance of Uganda’s agricultural sector.”