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Uganda Domestic Credit
By 1981 the rate of growth of domestic credit was 100
percent
per year, primarily as a result of government borrowing
from
domestic sources. The 1981 budget attempted to reestablish
financial control by reducing government borrowing and by
floating the shilling in relation to world currencies.
This
measure led to a sharp decline in the growth rate of
domestic
credit and to a temporary decline in the central
government's
share of domestic credit from 73 percent to 44 percent in
1986.
The following year, however, domestic credit recorded
growth of
over 100 percent, primarily reflecting credit extended to
private-sector owners for crop financing. During 1987 crop
financing for private owners again increased, while the
government's share of domestic credit fell even further,
from
45.3 percent to 30.7 percent. Crop finance accounted for
86
percent of all financing for agriculture, crowding out
commercial
credit to other areas within agriculture. Commercial
lending for
trade and commerce also increased during 1987, rising from
15.6
percent to 23.7 percent of total lending in 1986.
Commercial
lending to manufacturing, building and construction, and
transportation rose marginally, while lending to other
sectors
declined.
The Uganda Commercial Bank introduced a new program,
the
"rural farmers scheme," to help small farmers through
troubled
economic times. This program aimed to boost agricultural
output
by lending small sums directly to farmers, mostly women,
on the
basis of character references but without requiring loans
to be
secured. Most of these loans were in the form of inputs
such as
hoes, wheelbarrows, or machetes, with small amounts of
cash
provided for labor. The farmers repaid the loans over
eighteen
months, with interest calculated at 32 percent--marginally
lower
than commercial rates. Under this program, the bank had
loaned
USh400 million to approximately 7,000 farmers by 1988. The
scheme
attracted more than US$20 million in foreign aid,
including US$18
million from the African Development Bank.
Data as of December 1990
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