What Constrains Smallholder Farmers Decisions to Participate and use Agricultural Value Chain Financing in Rwanda The Case of Smallholder Potato Farmers in Musanze and Nyabihu Districts

Smallholder farmers contribute more to food security and poverty reduction in Rwanda. However, lack of agricultural finance is one of numerous challenges they face for improving productivity and increasing income along the value chain. The objectives of this paper were to determine the factors influencing the farmers' decision to participate and use agricultural value chain financing in Rwanda and to analyse the constraints hindering smallholder farmers' decision to participate and use agricultural value chain financing in Rwanda. Cross sectional data were collected from a random sample of 585 smallholder potato farmers in Musanze and Nyabihu Districts. Results of probit model revealed that sex, age, marital status, education, farming experience, membership to farming associations, household income and distance to market significantly influence the farmers' decision to participate and use of agricultural value chain financing. The study also found that financing agricultural activities remain a key challenge for smallholder potato farmers. Fear of borrowing, lack of financial literacy, lack of skills in budgeting and unexpected production, interest rate and others loans charges, lack of collaterals, short repayment period and lack of financial literacy have been found to be the main factors constraining potato farmers' participation and use of agricultural value chain financing. Nevertheless, potato productivity will always result from the interaction between all potato value chain actors. The study recommended the government and value chain stakeholders to formulate integrated policies that facilitate smallholder farmers to access to convenient financing products in order to improve productivity and to meet the customer demands. Patrice Mugenzi | George Owour | Hillary K. Bett "What Constrains Smallholder Farmers Decisions to Participate and use Agricultural Value Chain Financing in Rwanda? The Case of Smallholder Potato Farmers in Musanze and Nyabihu Districts" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-1 , December 2020, URL: https://www.ijtsrd.com/papers/ijtsrd38001.pdf Paper URL : https://www.ijtsrd.com/engineering/agricultural-engineering/38001/what-constrains-smallholder-farmers-decisions-to-participate-and-use-agricultural-value-chain-financing-in-rwanda-the-case-of-smallholder-potato-farmers-in-musanze-and-nyabihu-districts/patrice-mugenzi