Factors influencing access to agricultural credit among farmers in Uganda

Abstract

Improving access to appropriate financial services by resource-poor people has been increasingly recognized as one means of breaking the vicious circle of poverty they are trapped in (Orok, A. B., & Ayim, S.,2017). Despite the efforts by government, such as Operation Wealth Creation (OWC), Emyooga, Youth Livelihood Program and Parish model, farmer’s access to credit in Uganda is still very low. Very few farmers have been able to access credit and those that have been able to access it, the amount received is too low. The main aim of this study is to assess the factors influencing access to agricultural credit among farmers in Uganda, Specifically, the study seeks to achieve two objectives: to assess level of awareness of credit access among farmers in Uganda and to determine factors that influence credit access by farmers in Uganda. The Study uses secondary data which was collected under the Annual agriculture survey (AAS) survey for the timespan of an agricultural year (2018-2019). An agricultural year has two seasons i.e., first season (January-June) and second season (July to December). To address objective one the descriptive statistics were used to characterize social economic factors that are associated with use of credit or not using credit and the study adopted the binary probit model for objective two to predict the probability that an individual farmer uses credit. The study finds that farmers using credit were 31%) and disaggregating social economic characteristics by credit use and non-credit use, it was found that participating in crop growing and livestock keeping were significantly different between access to credit and non-participation in credit from the descriptive statistics. Probit results showed that being male household heads, age of the household head, participation in subsistence farming, and participation in commercial farming, positively influencing farmer’s access to credit,. However, e crop growing negatively influences access to credit. The study recommends that:- Government should continue with efforts to bridge gender gaps such that all household heads regardless of sex, access credit. This could be done by helping women in both credit awareness and forming special credit schemes; Promoting crop insurance to reduce risk structure of crop growing due seasonality changes, noting that both subsistence and commercial farming were significant; Government should foster mechanisms to favor large scale farming, by helping farmers not to access only credit but reasonable credit; and finally government should help with formalization of land ownership to help farmers possess land titles that later act as collateral for credit access. Suggestion for further research to determine the contribution of credit in the fight against food insecurity among farmers in Uganda.