Value chain governance and access to finance: Maize, sugar cane and sunflower oil in Uganda

Abstract

While financial institutions have had relatively little success in overcoming the risks and costs of lending to agriculture, rising food prices and shortages have made it imperative to find better ways of increasing financial flows in support of increased agricultural production and marketing. Direct value chain finance transactions operate with the same logic as any other financial transaction. The lender must engage in some form of client screening, client monitoring and contract enforcement. To successfully accomplish these tasks, direct value chain lenders can use information gained through their value chain relationships about their clients and their clients’ businesses. The value chain governance structure influences how easily and successfully a value chain lender can accomplish these tasks. Value chain governance structures can be defined with a typology along a continuum of four types of relationships described generically as market based, balanced, directed and hierarchical. A market-based value...