PROVIDE AGRICULTURE GUARANTEE AND CROP INSURANCE NOW
OR
WAIT FOR DOOM
A CASE OF A HAILSTORM THAT HIT MWIZI SUB-COUNTY, RWAMPARA, MBARARA DISTRICT IN UGANDA; APRIL 2013
Every day, the sun rises and sets. Yet, each day is a unique one. For Mwizi sub-county, the dawn of the 7th day of April 2013 presented a momentous episode in the lives of the dwellers. It was nearer to the biblicalproclaim day of doom.
I was in Mwizi Sacco office for normal business as usual. Clients started to come in one by one. Unlike on other days, clients who were walking out of office kept around a bit longer and seemed to be discussing something peculiar. I picked interest and tried to explore what it was. Guess what? A rainstormhad devastated three villages in the neighbourhood. The talk went on and on and every passerby seemed perplexed by what had befallen the villages. A terrible storm! Everybody exclaimed.
Ninety percent (90%) segment of Mwizi Sacco loan portfolio lies into agriculture and a good number of the inhabitants in those villages have loans from the Sacco!This impelled my anxiety to find out more on what had ensued. Immediately; I mounted the bike and rode on the rough slippery road to the nearest of the villages. In less than an hour time; I was there.Oh! What a calamity I witnessed.
The welcoming scene is that of the doomed faces by the dwellers. Shelters have been wrecked,and sincerely; the weak ones have totally crumbled! Inhabitants are dumb folded under the stinging coldness; also having experienced a sleepless night because theshelter covers had been lifted away by the gyrating winds. Both the fathering and fatherless are speechless; pondering upon the pending inescapable famine.The school caring parents are worried about the next instalment of school dues, but more importantly; almost every household is perturbed by the fact that they may lose their collateral securities[1] attached to the Sacco loans.
What a devastating rainstorm! I stood bewildered and could easily gauge the stunning weight of the pinch of the destruction of the crops, houses and other businesses upon the poor fated farmers.I took pictures of the phenomenon which relayed a message about the disaster and returned to office empathetically with a clear appreciation of the predicament. In my personal judgement, unless otherwise; the farmers were surely to default the Sacco loans soon after.
Indeed, later in the afternoon of the day following the dooms night, there was an unusual engagement of the officers’ phones to that effect. A number of downtroddenloan clients begun to stream the manager’s office;pleading for loan terms review. At first, I could see that the manager was a bit reluctant to the victims’ plea. However; by close of the 2nd day of the tumultuous calamity, the magnitude of the applications filed to the effect of the devastation had raisedadequate concern. The plea of the victim clients for loan rescheduling hadbecome not only irresistible but also very inevitable. To all stakeholders, and as fate dictated; nothing but rescheduling was the immediateramification.With this; clients got some bit of relief.
Alas for me; and indeed formany others like me, a mere act of procedural rescheduling did not seem to offer an automatic guarantee that the farmers would be able to meet their loan obligations effectively. The pledged collateral securities still lay at the verge of loss as was the Sacco loan portfolio health still on the brink of default. Although this can still enjoy some benefit of doubt for the moment; the fact that farmers would still undergo terrible hardships with loan repayments remains indisputable.
The above notwithstanding; even ifthe farmers of Mwizi will manage to pay off their loans as rescheduled; the hailstorm incident still serves as a whistle blower to all farmers and institutions engaged in agriculture lending. The tragedy at least for the agrarian economies like Uganda should help to invoke the spirit of agriculture guarantee[2]and crop insurance[3] among the agro-based financing institutions, rural farmers and farmer organizations. In the opinion of the writer, agriculture guarantees and crop insurance will be crucial in cases where such calamity ravages a wider area. Otherwise, given the effects of the current climatic change indications on agriculture, the farmers and the institutions that lend to farmers in the agro-based economies should wait for a dooms day.
In the mean time,farmers and the institutions that lend to farmers in the agro-based economies need to appreciate and practice risk management measures mainly Portfolio diversification as well as agriculture diversification among others.
[1] For Mwizi, collateral security simply refers to land where the family livesor the banana plantation which is the sole source of livelihoods in for most households.
[2] Agriculture guarantee can be defined as payments made to producers of agricultural products for the purpose of stabilizing food prices food prices, ensuring plentiful food production, guaranteeing farmers’ basic incomes and generally strengthening the agricultural segment of the national economy.
[3]Crop insurance refers to a contract of indemnity by which, for a specified premium, one party promises to compensate another for the financial loss incurred by the destruction of agricultural products from the forces of nature, such as rain, hail, frost, or insect infestation.