02/09/23

Village Savings and Loans Associations for  smallholder coffee farmers in Uganda 

 

 

As demand for specialty coffee increases, there is pressure on the smallholder farmers, the main contributors to the specialty coffee volume, to scale up production on their small farms. Increased production on their farms can only be achieved through increased investment in farm inputs, something that is hard to achieve by these farmers due to the low household income and limited access to finances. Another barrier is that available financial institutions are expensive as they require collateral and have high interest rates. 

 

Many financial innovations have been developed in the farming communities as the farmers need sustainable and affordable solutions to access financing. Currently, the most promising financial solution for smallholder farmers is the Village Savings and Loans Associations groups (VSLA's). These are small community savings groups formed by the farmers with the aim of lending to the different group members in times of need. They are locally organized, self-managed, and secure as all participants are locals from the given area, which has made them popular and an easily acceptable alternative for the farmers. Many farmers testify to the positive impact the VSLA groups have had on them as they can now easily access credit with lower interest rates which they use to buy inputs for their farms, and also invest in other income-generating businesses like retail shops, piggery, poultry, among others. 

 

Mr. Muguni Alex, a member of Mutima Gumu farmer’s VSLA group testified to being able to educate all his children with the help of the finances attained from the group investments made in poultry, and farming of annual crops like maize.  

 

Kawacom has continued to sensitize the smallholder farmers on the VSLA structure, group dynamics, and the benefits of these groups so as to strengthen the group operations. In partnership with Taylors of Harrogate, Private Sector Foundation, and Agricultural Business Initiative, Kawacom has been able to distribute more than 100 VSLA group starter kits to newly created groups in the Sipi region, Kasese, Westnile, and Albertine regions.  

 

 

 

Article written by: Rachael Ange 

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