The drought has caused significant crop failure and a lack of pasture, leading to low production of both crops and milk.
The prolonged drought, coupled with intense heat, has severely impacted Uganda's agricultural sector, leaving farmers burdened by loan repayments they can no longer meet.
Many farmers, who had taken out loans from financial institutions to fund their agricultural ventures, are now struggling to pay back due to reduced yields.
This crisis has also affected money-lending institutions, with rising loan defaults as borrowers fail to generate the income needed to settle their debts.
The drought has caused significant crop failure and a lack of pasture, leading to low production of both crops and milk.
"The climate has really changed, and we are worried. If you look around, you can see the heat is much more intense than in previous years," said Amon Namara, the General Manager for Muhame Financial Services.
Areas such as Isingiro, Kiruhura, Kazo, and Ibanda have seen pastureland dry up, leaving animals without feed and consequently halting milk production.
"If you had taken out a loan, it means you are not getting enough income to repay it," Namara added.
The drought's effects go beyond financial strain, contributing to food insecurity and the loss of livestock.
Brigadier General Joseph Onata, CEO of Wazalendo Sacco, highlighted that harsh climatic conditions have exacerbated the financial difficulties for Savings and Credit Cooperative Organizations (Saccos).
"If someone borrowed an agricultural loan and failed to harvest, paying back the loan becomes a challenge, leading to rescheduling, which then affects the liquidity of the Saccos," he said.
During the 24th Annual General Meeting for Muhame Financial Services, Gen Onata called for a shift in lending practices.
He advised that Saccos refrain from granting loans for activities that harm the environment, particularly those contributing to deforestation.
"We are now facing extreme heat, and it's time to encourage afforestation to restore the environment rather than fund destructive activities," he stressed.
Some Saccos, including Muhame Financial Services, have already taken steps to mitigate environmental degradation.
"We do not provide loans for activities like tree-cutting or charcoal burning. Instead, we encourage loans for sustainable solutions such as solar power and biogas," said Rev Can Kankiriho Robert, chairman of the Board of Governors for Muhame Financial Services.
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To help farmers weather future climate disasters, some Saccos are promoting agricultural insurance.
"By enrolling in agricultural insurance, farmers can pay premiums upfront, and in case of a disaster, the insurance will help cover the damages," Namara explained.
Gen Onata also emphasized the need for Saccos to focus on offering quality services to their members as part of a competitive strategy.
He reiterated the importance of the government establishing a unified regulator for Saccos to avoid confusion and protracted legal disputes.
The prolonged drought continues to place immense pressure on both farmers and financial institutions, highlighting the need for long-term solutions to build resilience in the agricultural sector.
