Economic viability of agro-input retail business in Eastern Uganda.

Abstract

With the advent of input market liberalization in Uganda, there has been an increase in private sector investment in agro-input trading. However, the high prices and unavailability of agro-inputs in rural areas continues to be a concern. The presence of viable agro-input retail businesses in such areas would be of great help. This study was therefore intended to assess the economic viability of small-scale agro-input businesses in rural areas and the factors that affect economic viability. The study was carried out in the districts of Tororo, Pallisa, Kumi, Mbale and Kapchorwa in Eastern Uganda. Within these districts, 91 rural agro-input retail businesses were selected purposively and interviewed using a structured questionnaire. Descriptive statistics were generated and a t-test used to determine the difference in the socio-economic characteristics of the seasonal and permanent rural agro-input retail businesses. The Net Present Value was generated to determine the private and social level viability of the rural agro-input retail businesses and a t-test used to determine the difference in viability between the seasonal and permanent rural agro-input retail businesses. Analysis of the factors affecting the viability of the rural agro-input retail businesses was undertaken using Weighted Least Squares (WLS). Results from the Net Present Value calculations indicated that on average, the rural agro-input retail businesses were viable and there were no significant differences in the viability between seasonal and permanent businesses. However, the permanent businesses generated more positive net present values compared to the seasonal businesses, at both the private and social level of viability which implied that the permanent businesses were more viable. The weighted least squares results showed that the total amount of credit received in 2003 and 2004, training in business management practices, total volume of sales for 2003 and 2004, distance from the main supplier, household size, and membership to a traders association were significant factors affecting business viability. This study therefore provides evidence that expansion of private wholesale networks in rural areas, activities aimed at human capital development, provision of credit at affordable interest rates and less stringent collateral requirements will improve on the viability of rural agro-input retail businesses.