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August 14, 2008

Ugandan parliament rejects government-backed agro loan guarantee scheme

Ugandan MPs have rejected the government's proposal to give a 50 billion shilling (US$31 million) agriculture loan guarantee to the Uganda Development and East African Development banks.

The MPs on the parliamentary committee on finance, planning and economic development said there were no clear regulations on how it would be managed and how it would benefit all the farmers.

In this year's budget proposal, finance minister Dr. Ezra Suruma said the guarantee would encourage commercial banks to lend to farmers. Under the plan, the government would deposit the money in the two banks to mitigate against non-payment of loans given to farmers.

"We shall not approve this money till government puts in place regulations on how the bond would be used and managed. It must also show the committee how it will benefit the majority of farmers," the committee chairperson, Gaudioso Kabondo, said. "Suruma's proposal has a lot of gaps and would promote corruption through connivance between the banks and customers, "Kabondo explained. He said if the Government wanted to transform agriculture it should help the small farmers and establish good infrastructure.

Henry Banyenzaki said, "There is no clear regulatory system to show how the money shall be used or monitored. Besides, it is not going to benefit the small farmers who should be the main target for such huge sums of money, but will just be kept in banks waiting for people to claim it."
He said this would provide an avenue for embezzling the funds.

Matthias Nsubuga asked, "How can the Government guarantee money which will be used by a few individuals?"

Grace Kyomugisha said the proposal did not show how it would improve agricultural production. The fund will only benefit a select elite group of farmers who can fund their projects, she added.

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