Rural finance in enhancing rural agriculture in Uganda, The challenges.

Abstract

The purpose of the study was to investigate the challenges of accessing rural finance to enhance rural agriculture while taking a case study of rice farmers in Busowa, Bugiri District. The study was guided by the following objectives: To identify the different sources of finance for rural farmers; To examine the challenges faced by rural farmers in enhancing rural agriculture and To establish the possible strategies to improve access to finance by rural farmers. The study used both qualitative and quantitative approaches. Data was collected using a self-administered questionnaire, and face to face interviews. The study was conducted using 50 respondents. The results from the findings reveal that there are different sources of financing which included; rotating credit and savings associations, government’s rural finance, microfinance, SME financing and Credit Unions. It found out that farmers face a number of challenges in accessing finance. The challenges include; lack of collateral, poor technology in rural areas, lack of infrastructure, lack of financial opportunities information, poor financial support and government policies, poor transportation, and poor bankability of rural farmers. There are possible strategies to enhance access to finance, these strategies included; segmenting the smallholder farmers, improving risk assessment of rural farmers, improving delivery channels, effective government policies, addressing infrastructural challenges, investments in climate adaptation and focusing on youth and women. In conclusion there is a great need for rural farmers to access the necessary rural finance in order to enhance rural agriculture. Finally, it was recommended that the financing organizations including microfinance institutions the government should ensure segmentation of the smallholder farmers to enable easy accessibility of financing by these farmers. It was also recommended that the government should address infrastructure to enable easy movement of farmers and also improve service delivery. It is recommended that risk assessment of rural farmers is made to enhance access of finance.