Ugandans can now use farm produce and electronics to borrow from banks

By George Mangula

The Uganda Registration Services Bureau (URSB) has operationised the Security Interest in Moveable Property System (SIMPRS), according to the agency’s top executive.

“We are super excited to announce that the Security Interest in Moveable Property System is now fully operational,” says URSB Registrar General Bemanya Twebaze.

According to Twebaze, Finance Trust-Bank  has registered the first security interest on the system. He says the new development now enables Ugandans to offer their crops and animals on farms as security for bank loans as opposed to the past where items like land titles were a major security required by commercial banks.

SIMPRS was established under the Security Interest in Movable Property Act of 2019. The Law allows Micro, Small and Medium Enterprises as well as individuals whose major constraint to economic growth is lack of affordable credit, to use their movable assets as collateral for loans.

The SIMPRS has been developed in fulfillment of Government of Uganda’s objective in the Second National Development Plan 2015/16 – 2019/20 of reducing interest rates, decreasing default rates and increasing the pool of new borrowers.

“The fully online Registry facilitates secured creditors to register their security interests in movable assets such as livestock, crops, motor vehicles, electronics, and furniture while providing the public with notice of the existence of such security interest,” he says.

The official says crops like coffee, banana, tea, fish stocks, poultry, livestock, seeds as well as unborn offsprings of animals, among other farm output can be used to obtain loans. Loans, he says can be obtained against crops which are already grown, growing or to be grown.

Depending on the bank, he said electronics like computers, TVs, fridges and carpets can be used as security to obtain loans.

It is envisaged that access to this information will result in affordable financing from regulated financial and non-financial institutions who prefer traditional collateral like land and buildings, as searching the Registry helps creditors to evaluate the risk of lending before a decision to lend is made,” Twebaze says.

However, analysts say lending to the agriculture sector especially to disorganized farmers is so risky and banks are cautious when it comes to lending to the sector that is hardly insured even though government has put in place the agricultural insurance scheme dubbed the Uganda Agricultural Insurance Scheme (UAIS).

The scheme is a Public Private Partnership (PPP) arrangement with Uganda Insurers Association (UIA). The Scheme is meant to provide insurance premium subsidies to farmers. 

The general objective of the scheme is to ensure that a Ugandan farmer is largely protected against the effects of agriculture risks (especially the production risks) by introducing measures which shall ensure an indemnity sufficient to keep the farmer in business.

The objectives of the scheme are; to make agriculture insurance affordable to farmers in Uganda and to increase access of farmers to credit by protecting agriculture loans disbursed by financial institutions from the effects of specified agriculture risks.

A premium subsidy is provided to farmers who directly purchase agriculture insurance and those that access agriculture loans through financial institutions.