Access to Financial Credit Facilities by Farming Households in Uganda

This study set out to examine the determinants of credit access among farming households in Uganda. The study using data extracted from the FINSCOPE Uganda survey data 2013. Descriptive results revealed that access to credit is still very low particularly formal credit access in Uganda. Econometrics results on determinants of credit access based on multinomial logit model revealed that financial literacy, years of education, ownership of land title, location, perception about lending behavior of the bank, distance to the nearest bank and income level are important factors influencing the demand for formal credit. Gender, age and income level were also found to have significant influence on probability of using semi-formal services and while financial literacy, gender, age and income were found to have significant influence on demand for informal credit. These results are pertinent if we want to include over 70% of the farming households who are excluded from credit access and over 90% who are excluded from formal credit services. Since the majority farmers who do not access credit reside in rural areas, the study recommends that credit policies and supportive interventions that target farmers need to be emphasized.  For example, policy support interventions aimed at improving credit access as well as interventions that address the constraints and limitations to formal education and extension services should be supported to increase farming households’ access to formal credit.