Agribusiness owners shall use either contracts, or their harvest as security with pilot project already kicked off in Lira district.
Equity bank aims to provide an innovative banking solution for alternative collateral finance. Structural commodity financing is available for as low as 14% interest rate.
Having successfully launched the product in lira, Equity Bank Uganda has now moved to launch the same innovative product in Arua. The structural Commodity Finance Loan is a financing solution aimed at supporting the growth of agribusinesses and smallholders in West Nile.
The structured commodity finance loan will allow agribusinesses to borrow against their agricultural inventory which can be used as collateral for security and repayment. Agribusinesses stand to benefit from SCF by receiving financing to ensure that cash flow is available for maximum output; with the intention of repaying the loans once sale of the agricultural produce is complete. A financing solution that will allow them to sustain customer demand and have access to new markets and customers.
“Agriculture remains a key sector in our economy and as Equity, we have chosen to invest in up scaling smallholder and medium holder farmers because they play a key role in the growth of the economy. With the new Structured Commodity Financing, farmers and agribusiness SMEs can now effectively manage their liquidity and mitigate against risks related to the production, purchase and sale of farm outputs.”, commented George Kato, the Head of Retail Banking at Equity Bank during the launch of the new financing solution.
Working with the farmers, Equity will isolate assets which have relatively predictable cash flows attached to them through price discovery and discounting. The agribusinesses will then use these to mitigate risk and secure affordable credit with flexible repayment terms.
With the new facility, customers can now access a loan amounts of between UGX. 30 Million to UGX. 5 Billion at competitive interest rates per annum determined on a case-by-case basis and repayable within flexible periods as agreed during the application process.
Farmers and agribusiness SMEs looking to access the new financing solution will need to have an existing bank account with Equity Uganda while new customers will be required to open new accounts with the bank and provide previous banking history and statements. All agribusiness SMEs will also have to provide proof of operation in the commercial agribusiness sector for at least one year and demonstrate ability to repay the loans as well as meet the other mandatory loan application requirements.
Other than SCF financing, Equity offers farmers various financing solutions including production loans which aims at improving crop and livestock production, asset finance loans for farm machinery such as tractors, marketing loans and processing loans which allows them to add value to their farm inputs and increase sales. Equity Bank also highlighted supporting the women in Agribusiness in WestNile Region through their women finance product EquiMama.