Access and Use of Credit in Uganda: Unlocking the Dilemma of Financing Small Holder Farmers

Abstract

The paper examines the extent of access and use of credit by small holder farmers in Uganda. Despite several interventions in agricultural financing by government, access to credit by smallholder farmers has remained very low and stagnating over the years. The paper reviews information from the various agricultural financing initiatives government has implemented over the years including Prosperity for All (PSA) of 2008, the National Agricultural Advisory Services (2001), Entandikwa Scheme (1996), the recent Agricultural Credit Facility (ACF) and Microfinance Support Centre (MSCL), among others. It uses the Uganda Census of Agriculture dataset collected in 2008/09 to provide some insights on access to credit by agricultural households and examines two successful models of Centenary Rural Financing Scheme and Uganda Cooperative Alliance-Area Cooperative Enterprise (ACE) in promoting access to financial services to the rural poor. The findings of the review suggest that if government is to succeed in promoting access to financial services by small holder farmers, it needs to establish strong institutional frameworks for agricultural financing as well as explore the possibility of setting up a rural or agricultural development bank