Credit Demand Amongst Farmers in Mukono District, Uganda

Abstract

The role of credit in promoting economic activity cannot be underestimated. Nevertheless, credit extension to the agricultural sector in Uganda is dismal compared to other sectors. This study uses cross sectional data collected from 127 farmers in Mukono District, Uganda to shed some light on access to, and the characteristics of demand for credit among the farming communities. We employ the binary logit model estimation to analyse demand for credit. The empirical results suggest that the probability of a farmer demanding credit increases with proximity to credit facility, easier application procedures, customary land tenure system and membership to farmers’ association. In contrast, the likelihood of credit demand decreases with increasing farm size. Policy options and recommendations including encouragement of forming farmers’ associations, leveraging mobile money technologies to reduce distance, and streamlining application procedures could bolster agricultural credit demand in Uganda.

Keywords: Credit demand; farmers; Mukono District; Uganda – East Africa