By John Robert Okware

I grew up near the slopes of Mount Elgon in Eastern Uganda. The fertile soils there are favorable for agriculture and our family earned a precarious living from farming. Right from the age of five, I was oriented into agriculture as a source of not only food but also school fees for my education. Every season presented challenges. 

I remember vividly one season when we had a bad harvest because of drought, we got only four bags of cotton out of the projected 20 bags. Worse still, the school term was due to begin, so we needed to sell off the cotton to raise fees. When I delivered the cotton to our cooperative society store, the price had dropped to less than $10 per bag and the money was to be paid to us after two weeks – most likely because the cooperative had liquidity challenges. With this being the only income source at that time, and there being no one to borrow from, we had to wait. So I reported to school two weeks late. This might sound familiar to some of you reading this. 

Later, while at high school and even when I went to university, I grew maize to pay for my tuition. The experience was no different; each year was a struggle with lots of uncertainty depending on the weather and the prices. These experiences inspired me to pursue studies in economics where I could contribute towards making the agricultural sector more efficient and rewarding, especially to smallholder farmers and small and medium enterprises (SMEs).

I began my career as a loan officer with Centenary Bank in the Luwero Triangle where agriculture was the core economic activity. I used to ride a motorcycle 50-100km several times a week to appraise livestock, coffee, and pineapple farmers for financing. I developed a close connection with the farmers and the economics of their farms, and this enabled me to assess the risks and grow a quality loan portfolio. As I progressed in different roles, I started to see how building the capacity of the foot soldiers, providing the right incentives, and putting the right support structures in place was critical for growing a quality agriculture portfolio.

When I later joined Opportunity Bank and moved into more senior management roles, I realized that the bank could not build a healthy portfolio in agri-SME lending alone. The agriculture loan portfolio was significantly loss-making, largely because the bank had a high ratio of non-performing agri loans and the cost of originating these loans was high since most of the SMEs were involved in the production node of the value chains and were located in far and hard-to-reach areas. There was also a high turnover of loan officers going to other banks that paid a bit more, which affected the loan portfolio management and required continuous capacity building. The bank needed partners to give a hand to change the situation and make the portfolio profitable through capacity building at different levels, risk-sharing instruments, digitization of operations, and especially in providing grants for expanding the footprint to the rural and hard-to-reach areas. 

I know that the private sector does not always speak the same language as governments, donors, or NGOs, but I have also seen what is possible when these actors work together. At Opportunity Bank, partnerships with the likes of USAID Development Credit Authority (DCA), the Agricultural Credit Facility (ACF) of the Ugandan government, and other risk-sharing guarantees enabled us to grow a quality agriculture loan book from 15% to 28% of the total loan portfolio. 

When this position with Aceli opened up a few years ago, I saw an opportunity to apply all of my experience and learning – as a farmer, loan officer, branch manager, and in senior management at a commercial bank – to the entire market system. In Aceli’s partnership with the Uganda Bankers Association and dialogue with the Bank of Uganda, I see an opportunity to strengthen the regulatory environment for lenders across the country. When I go to meet with banks, I see how they are using Aceli’s incentives to enter new regions and value chains. When I visit branches in Mbale and Lira and accompany loan officers visiting their SME clients who are getting a first-time loan, and their farmer suppliers who are now getting paid on time, I see real change in action. And when I visit SMEs that have graduated from our technical assistance program, I see them better understanding their businesses and being able to attract more capital. Looking at all of these changes across the sector, I see a brighter future for SMEs in agriculture.

I am energized to see Aceli’s partners working together to build a stronger and more inclusive agriculture sector that creates opportunities for families like my own. My heart is full. 

John Robert Okware is the Aceli Country Director for Uganda, leading engagements with a range of stakeholders from commercial banks and other lenders serving agricultural SMEs, to technical assistance providers, data and learning partners, government officials, and donors.

By Andrew Ahiaku

It was a good year. The rains came early to my farming community of Atidzive in the Akatsi-South District of Ghana, and we ploughed the fields for planting. Then came a truck with certified seeds (not the lower yielding ones we had saved from the last harvest) and bags of fertilizer (which we usually couldn’t afford). The farmers had formed groups and received loans for the farming season. The interest rate was high but the farmers were happy for the support from the district Community and Rural Bank.

My auntie, who was the Matriarch of the family, used her loan to hire additional farm hands for weeding. The harvest was so big that she had to hire extra help to carry it to the storage building. I remember being exhausted and sore from carrying so many 15 kg sized-bags of maize, but also jubilant – for the first time, my entire boarding school fees were paid at the beginning of the term! I was known for late payment of fees when I lost my Dad in at age 12. All the farmers in the village paid their loans on schedule. My auntie bought a new metal roof for her house, we got new clothes, and Christmas was festive with presents for all the kids. Around our village of a few hundred families, several families were able to send their children to secondary school that year, which was a big deal – that was the generation that became teachers and police officers.

The next season, my auntie leased additional land in anticipation of a higher loan amount. We cleared the farm early and waited for the bank to approve her loan. She stopped by the bank every week she was in the district town on a market day; they kept assuring her that approval would eventually come. A month later, after she had missed the best time to plant, she was told the bank won’t be giving loans – they had exceeded their limit or something of the sort. My young mind didn’t understand what that meant. Why would a bank refuse a client a loan when she has met her obligations on an earlier one? If they knew she won’t get the loan, why did they encourage her to lease more land?

That season was like most before and since. My auntie and the other farmers planted on small plots with the seed they had saved up from the previous harvest. They couldn’t afford the good seed or fertilizer, couldn’t pay for labor to weed – and at the end of the season, they didn’t need to hire extra labor because the harvest was paltry. We paid my school fees in bits throughout the semester and I was sent home more than once when we couldn’t keep up with the payments. But I was lucky. I made it through secondary school, worked for a few years as a basic school teacher, saved up money, and went to university.

Fast forward eight years, I was working at Barclays Bank and an opportunity came up to lead a new lending unit focused on agriculture. I took the job hoping I could help more farmers like my auntie and agricultural SMEs get loans. We were able to accomplish a lot. Our unit grew from just me to six people in three years. We broke down silos between origination and credit risk through a joint team training on underwriting and managing agri-loans. As the portfolio grew, senior management got excited and we also received accolades in the media. USAID even gave us an award for Agri-Lender of the Year in Ghana!

But we also came up against the barriers that have persistently stifled lending to my auntie and so many others. My colleagues on the credit risk team didn’t fully understand seasonality in farming and how timing makes all the difference in agriculture. Many times, we couldn’t get loans approved before planting season and farmers lost interest. We also had conservative policies. We required collateral valued at 120% of the loan amount but then we discounted the value of the collateral presented to us by 30-50% – so a business looking for a $100k loan needed to have collateral of $200k or more!

These internal policies at the bank were so frustrating, but over time I began to understand where they came from. To begin with, banks are naturally risk averse. Lending in agriculture is risky, takes a lot of work, and bankers have to get their nice shoes and suits dirty visiting clients. In Ghana (and most African countries) banks can earn a nice profit by collecting deposits, lending to the government, and getting fat on the interest spread.

Some economists call this the “lazy bank” model. But that’s only part of the story. Around the time my auntie was waiting for her loan that was never approved, international banking standards were changing under the first of the Basel Accords. By the time I was trying to make agri-loans for Barclays, Basel III had taken effect. Basel III was designed to prevent the kind of daredevil lending that led to the collapse of Lehman Brothers and the 2007-08 financial crisis.

The result of Basel III and the International Financial Reporting Standard 9 designed during the same period was more stringent requirements on banks. When I joined Aceli a couple of years ago, I wanted to understand better how these international standards affected Central Bank policies in Africa, and how those policies influenced commercial bank practices. Did banks really need to have such conservative collateral requirements, or were we just being lazy? Read Aceli’s new Learning Brief to find out what I learned.

Auntie Minawo Ate Ahiaku, I promised you that I’ll get to the bottom of this.

Andrew Ahiaku is the Head of Financial Sector for Aceli Africa, leading engagement with commercial banks to increase their lending to agricultural SMEs and supervising capacity building for both SMEs and lenders.

By Eddah Nang’ole

In my role defining criteria for Aceli’s climate & environment impact bonus and supporting lenders to develop and implement ESG policies, I hold two competing realities in my head. There are the agro-ecological practices that I learned early in my career as a researcher studying how beneficial insects can control pests and in later roles in program management and evaluation for regenerative agriculture. And then there are the practices that I grew up with on our family farm in the North Rift region of Kenya – practices that produced high yields in the past but may no longer, at least in their current form, be viable.

My parents grew maize on a 30-acre plot. We were lucky in many ways because they also had full-time jobs so the farm supplemented our family’s income and paid for education and other basic needs. British settlers had brought mechanized practices to our region decades earlier, and our farm and those around us combined mechanized with manual farming.  We applied synthetic manure and used hybrid seeds. Tilling and planting was mechanized while spraying herbicides, top dressing, weeding, and harvesting was done by casual workers, mostly women and youth.

While my siblings preferred non-farm activities like household chores, I was always interested in the farm and wanted to contribute. From the age of 12 years, I manually kept the farm records in a notebook, tracking our expenses, making sure the workers were paid on time, and helping my parents to balance the books at the end of the harvest. The production cycle followed a steady calendar rhythm: land preparation and planting in March-April, harvesting in October-November. Yields were consistently high – 40-50 bags per acre.

But the yields started to decline in the late 1990s to 30 bags; today, it’s rare for farmers in the region to harvest more than 15 bags per acre. The soils are depleted from intensive monocropping. The weather is changing too: heavy rains around the harvest increase post-harvest losses; fall army worms multiply with the warming temperatures and drive up costs of pest management. Farmers like my brother, who took over the family farm, must choose between doubling down on chemical fertilizers, pesticides, and mechanization or adopting regenerative practices that are more labor-intensive, like planting cover crops, mulching with organic compost, using beneficial insects, and preparing their fields with no-till or low-till techniques.

I’m convinced that regenerative agriculture will benefit farmers, the environment, and our food system in the long run, but the choice for any given farmer today isn’t as clear. Farmers are living on the front lines of climate change. They have limited information, technology, and access to finance. And most don’t have the luxury to experiment with new approaches that might not work.

In developing and administering Aceli’s impact policies, my task is to distinguish between practices that are detrimental to human health and the environment and should be excluded entirely, those that are acceptable or even “good,” and those that are better for both humans and the environment and should be positively rewarded. It has been gratifying to see some positive changes in the year and a half since we launched – four lenders now have ESG policies that didn’t before; many lenders are responding to Aceli’s incentives by proactively looking for businesses that are gender inclusive, youth inclusive, contribute to food security and nutrition, or promote regenerative and circular agricultural practices that qualify for our impact bonuses. Aceli is only one actor in an ecosystem of organizations trying to make African agriculture more prosperous and sustainable. I am happy to be playing a small part.

Eddah Nang’ole is the Impact & Learning Manager for Aceli Africa and responsible for designing and implementing the Impact / ESG policy and impact bonus criteria for Aceli’s financial incentives program.