Kampala
For decades, the story of Ugandan agricultural finance has had a familiar shape: a smallholder farmer with a good harvest and no formal way to turn it into working capital, sandwiched between a commercial bank that considers her too risky and a moneylender who considers her too convenient to fleece. This week, Stanbic Bank Uganda made its clearest move yet to rewrite that story, announcing it has cut its lending rate to agriculture-based savings and credit cooperative organisations (SACCOs) to 10 percent per annum — a rate that undercuts typical commercial bank pricing by five to seven percentage points and signals an intensifying contest among lenders for Uganda's rural financial market.
The announcement, made at the 28th Annual General Meeting of the Association of Microfinance Institutions of Uganda (AMFIU) in Kampala, is not a one-off promotional rate. It is being pitched as a structural bet that the fastest way to get affordable capital to smallholder farmers is not to lend to them directly, but to lend to the cooperatives and village savings groups they already trust and belong to.
"We understand that SACCOs need affordable capital to serve their members effectively, and that's why we've reduced our lending rates for agriculture-based SACCOs to 10 percent per annum," said Stephen Segujja, Stanbic Bank Uganda's Head of Economic Enterprise Restart Fund, at the AGM. "Multi-purpose SACCOs will access financing at 12.5 percent." Eligible SACCOs can borrow up to Shs7 billion under the facility, which has also been extended to selected microfinance institutions.
THE SCALE OF THE PROBLEM
The rate cut lands against a backdrop that explains why banks are suddenly competing so hard for this market. Agriculture accounts for roughly 40 percent of Uganda's GDP and employs about 70 percent of the population, yet by some estimates barely 11 percent of farmers have ever accessed formal credit, even though a majority reach some form of financial inclusion through informal channels — savings circles, table banking, and village savings and loan associations (VSLAs). That gap between how central farming is to the economy and how little formal financing reaches farmers has long been identified as one of the biggest constraints on productivity: without predictable, affordable credit, farmers cannot buy improved seed and fertiliser at the right time, invest in irrigation or storage, or smooth the cash-flow gap between planting and harvest.
Cooperative-based lending has emerged as the preferred bridge across that gap because it solves problems that have historically made banks wary of individual farmer loans — the absence of collateral like land titles, the seasonality of farm incomes, and the high transaction cost of assessing thousands of small, scattered borrowers one at a time. SACCOs already aggregate members, track their savings and repayment behaviour, and understand local production cycles in ways an urban loan officer cannot. Government-backed Parish Development Model SACCOs have reportedly been able to charge members as little as 5 to 6 percent annually, compared with the 15 to 17 percent typically charged by commercial banks lending directly — a gap that illustrates why routing capital through cooperatives, rather than around them, has become the dominant model for expanding rural credit.
STANBIC'S BROADER PLAY
Stanbic frames the new rate as part of a much larger commitment: its Women, Youth and Farmers (WYF) programme, underpinned by a Shs1 trillion pledge to expand financial access, support enterprise growth and strengthen Uganda's informal financial sector. The bank says that since 2021 it has channelled more than Shs362 billion through SACCOs and VSLAs, reaching nearly four million Ugandans, with about 780,000 individual members having accessed credit through these cooperative structures.
The bank is also trying to address a problem that has quietly undermined cooperative finance in Uganda for years: weak governance and record-keeping inside the SACCOs themselves, which has periodically led to member losses, fraud scandals and collapsed cooperatives that soured rural communities on formal savings groups altogether. To that end, Stanbic says it has trained more than 35,000 women leaders and farmer representatives in governance, financial management and leadership, and has partnered with organisations including aBi Finance and deployed its own FlexiPay platform to help SACCOs digitise records, track transactions and improve transparency. Digitisation matters here in a very practical sense: a SACCO that can produce clean digital records of member savings and repayment history becomes a bankable institution in its own right, able to borrow larger sums on better terms — which is precisely the mechanism Stanbic is now trying to scale with its rate cut.
Stanbic is not acting alone in identifying this opportunity. A separate concessional credit line arranged between Pearl Bank and the French development agency AFD — a €15 million (roughly Shs60 billion) facility plus €1 million (about Shs4 billion) in technical assistance — is already reaching more than 170,000 individuals and farmer groups, including beneficiaries of Rwanyamahembe SACCO, Kyamuhunga Peoples' Co-Operation and Ebo Co-Operative Savings and Credit Society. Taken together with Stanbic's move, it suggests Uganda's agricultural lending market is shifting decisively toward structured, cooperative-channelled finance rather than the individual-collateral model banks have relied on for decades.
WHAT INDUSTRY LEADERS ARE SAYING
AMFIU Board President James Onyutta used the AGM to underline the stakes for the roughly 204 member institutions the association represents, including SACCOs, microfinance institutions, commercial banks, development partners and academic organisations. "Despite the evolving economic environment, our member institutions continue to demonstrate remarkable resilience and commitment to serving millions of Ugandans," he said.
Ministry of Finance Commissioner for Financial Services Moses Ogwapus, addressing the same meeting, credited the sector with widening the country's overall credit access. "Your work has enabled millions of Ugandans, particularly women, farmers and entrepreneurs, to access opportunities that were once beyond their reach," he said. His presence at an AMFIU event focused substantially on agricultural SACCOs also signals that government sees cooperative finance as a policy lever worth actively encouraging, not simply a private banking-sector trend to observe from the sidelines.
WHAT IT MEANS FOR FARMERS AND THE WIDER ECONOMY
For an individual farmer belonging to an agriculture-based SACCO, the arithmetic is straightforward and meaningful: borrowing at 10 percent rather than 15-17 percent on, say, a Shs2 million input loan for seed, fertiliser and labour can be the difference between a season that turns a profit and one that merely breaks even once interest is paid. Cheaper capital also changes what farmers can justify investing in — irrigation equipment, post-harvest storage to avoid distress sales at harvest-time price troughs, or better livestock breeds — investments that are hard to finance at higher rates given the multi-year payback periods involved.
At a market level, the rate cut adds to a broader repricing of rural credit that could gradually close Uganda's persistent rural-urban and formal-informal financing divide. If cheaper, cooperative-routed capital becomes the norm rather than the exception, it could reduce farmers' reliance on informal moneylenders who often charge substantially higher effective rates and can trap borrowers in cycles of debt tied to crop sales at unfavourable prices.
There are risks worth watching, however. Rapid expansion of cooperative lending only works if SACCO governance keeps pace with the capital flowing through them; Uganda's cooperative movement has a history of institutions that grew loan books faster than their internal controls, leading to defaults and, in some well-publicised cases, the loss of members' savings. The heavy emphasis Stanbic and its peers are now placing on training, digitisation and transparency reflects an implicit acknowledgement of that history. Competition among lenders driving rates down is good for farmers in the short term, but it will only translate into durable rural prosperity if the cooperatives receiving this capital can absorb and manage it responsibly — turning cheaper credit into higher yields and incomes, rather than simply more debt.
