Green Finance: Uganda's farming lifeline
What you need to know:
"Supporting grassroots organizations and renewing the national commitment to green finance is key”
Can Green Finance Unlock Uganda's Potential? Only 22 percent of Ugandan farmers in agribusiness have access to green finance according to the 2023 FinScope Uganda report. Many subsistence farmers continue to report less and less harvest every year and yet don’t know why. The answer is obviously climate change especially the changing weather patterns which affect yields for the often fragment landowner farmers, requiring them adopt climate smart farming practices.
Green finance, which combines financial strategies with environmental goals, is the lifeline for Ugandan farmers adopting climate-smart practices like crop diversification, efficient irrigation, and sustainable livestock management. It provides the necessary financial support to boost productivity, resilience to climate change, and reduce agricultural emissions.
Sowing the Seeds of Change: Green Finance in Action. A recent report by the Austrian Institute of Economic Research, commissioned by the World Bank, highlights the significant impact of environmental and climate change issues on Uganda's agro-based export sector. Despite these challenges, the focus of these enterprises remains on machinery, equipment, and skills, with little attention to sustainable investments in renewable energy or waste management.
The 2023 Finscope report further reveals that while 41percent of Ugandan farmers use biodiversity conservation practices and improved seed varieties, only 8percent have managed to secure financing for this practice, exposing a substantial 33 percent gap in funding.
Furthermore, the latest 2023 report on Uganda's Agricultural Credit Facility highlights both successes and areas for strategic refinement. While the ACF has empowered over 3,700 applications, with micro and small farmers constituting 63percent of its beneficiaries, there are concerns about the allocation of 40percent of loans towards working capital for the grain trade rather than climate adaptation and biodiversity conservation. On a positive note, the Uganda Development Bank (UDB) has shown a strong commitment to green finance since 2022, implementing a Green Finance Policy, investment strategy, and dedicated guidelines’.
The notable increase in green projects supported by UDB loan portfolio, rising from 8.9percent to 28.1 percent within a single year, exemplifies the effectiveness of these measures. The bank’s strategic emphasis on sectors such as climate-resilient infrastructure and climate-smart agriculture—as reflected in their 2022 investment portfolio—aligns seamlessly with Uganda’s developmental priorities and the objectives outlined in the Paris Agreement.
Groups like the Alliance for Food Sovereignty in Africa (AFSA) advocate for sustainable farming, while initiatives such as the START facility and aBi Finance offer crucial financial support. However, there's still a gap between plans and action. Uganda's National Biodiversity Strategy and Action Plan II (2014-2025) is thorough but needs better execution and more investment.
To progress, Uganda should focus on biodiversity-friendly farming practices and recalibrate policies to address financing gaps, including tax incentives for green investments and loan guarantees for sustainable agriculture. Supporting grassroots organizations and renewing the national commitment to green finance is key to protecting Uganda's biodiversity and securing food for its people.
The author, Mr Katsibayo Kagumya is a financial inclusion commentator and enthusiast.
