The Constraints to Irish Potato Value Chain Financing in Uganda
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This brief summarises the findings from the potato Value chain study on what constrains the financing of potato value chain activities in Kigezi sub-region1. Access to affordable finance remains a challenge to potato producers, input dealers, marketers and processors in Uganda. The key constraints to accessing credit from formal financial institutions are long loan application processes and collateral requirements. On the other hand, undercapitalization and high interest rates limit the capacity of informal credit sources to satisfy credit demands of the value chain actors. The value chain study results show that a majority of value chain actors rely on personal savings and small loans from informal credit sources. Most potato traders, and small-scale processors obtain loans from village savings and loan associations (VSLAs). Only 17% of potato producers, and less than 30% of agro-input dealers use formal sources of finance from commercial banks despite the low interest rates charged relative to the informal VSLAs. The consequences of limited financing of value chain actors are low productivity and technology adoptionat farm level which affect the business growth in potato trading and processing. Therefore to unlock and deepen agricultural financing, formal financial institutions can leverage on both capitalization capacity and the relatively low interest rates to design credit packages for agricultural value chain actors with shorter loan application processes. In addition, formal knowledge on the status on financing of marketing and processing value chain activities is scanty. This brief pieces together information on sources of agricultural financing in a value chain framework using potato as a case study.