Effect of village savings and loan associations on access to improved inputs among smallholder farmers in Kiryandongo district, mid-western Uganda

Abstract

Access to agricultural finance for smallholder farmers‟ investments in improved inputs is a big challenge in Uganda. Village Savings and Loan Associations (VSLAs) have been promoted to increase access to financial services for the rural poor who are predominantly small holder farmers. Some studies indicate that VSLAs alleviate cash constrains among farmers. It is unknown whether farmers use savings and loans from VSLA to purchase improved inputs. The main objective of this study was to assess the effect of VSLAs on access to improved inputs among smallholders in Kiryadongo District, Mid-western Uganda. Specifically, the study: (1) Determined the amount of savings, loans and insurance funds accessed by smallholder farmers participating in VSLAs in Kiryandongo District in 2014; (2) Assessed the main uses of savings, loans and insurance funds from VSLAs among smallholder farmers in Kiryandongo District in 2014. (3) Analysed the main factors influencing use of improved inputs among smallholder farmers in Kiryandongo District. A cross-sectional survey; with multi-stage sampling procedure involved individual 360 respondents, seven key informants and three focus groups. Data were collected on amounts of savings, loans and insurance funds in VSLA and how they were used and factors influencing access to improved inputs. Descriptive and inferential statistics were used to analyze data. The main results indicate that participation in VSLAs encouraged savings, increased access to loans and insurance funds among smallholder farmers. More VSLA participants (64.9%) than non-participants (28.8%) accessed loans. More participants than nonparticipants invested savings and loans in purchase of maize seeds and hire of animal traction services for land opening. Participation in VSLA together with old age and bigger farm sizes were the most critical factors influencing access to improved inputs in Kiryandongo District. In conclusion, participation in VSLA increased access to micro-financial services and improved inputs among smallholder farmers in the study area. The study recommends training in financial literacy to enable smallholder farmers to wisely invest savings, loans and insurance funds from VSLA. Furthermore, payments of share-outs should be made at beginning of planting season to encourage investments in agricultural inputs