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Uganda Table of Contents


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