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The Impact Of Rural Banking On Rural Farmers In Uganda

4750 words - 19 pages





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The lower calorie intake could lead to poverty, malnutrition and hunger. In an attempt to alleviate some of these potential problems, several institutional and non-institutional sources of rural credit have been made available to Africans. It is hoped that, in the long term, credit will enable the poor to invest in agricultural and non-agricultural productive assets, to adopt new technologies and farming methods, and to minimize environmental degradation. Uganda, like other sub-Saharan countries, has traditionally experienced low productivity, low income levels, low domestic savings, unemployment, and malnutrition. In 1976, the Ugandan government, through the Bank of Ugandan, established Rural Banks to channel credit to productive rural ventures and promote rural development. Rural development is a strategy intended to improve the economic and social life of the rural poor (World Bank 1975). Rural credit has been used in Uganda to enable the poor to weather shocks without selling the productive assets the poor need for protection against future shocks (FAO 1994). the purpose of rural development is “a rise in the standard of living and favorable changes in the way of life of the people concerned.” However, there is some anecdotal evidence that many beneficiaries of Rural Bank credit are salaried workers, whose likelihood of loan repayment is believed to be better than that of the small-scale rural producer.


The Ugandan government has made several attempts to promote rural development in an effort to increase the living standard of the people who reside in rural areas. These projects have failed for several reasons, including the high cost of living for farmers, and the lack of coordination between government agencies. More farmers in the rural areas do have problems in dealing with the rural banks or the credit unions. Some of these problems include preparing viable business proposals and collateral securities that the banks do demand. Meanwhile, majority of the farmers are not well educated in order to plan or write their own business proposals. In addition, it becomes very difficult for the farmers to secure loans because of the collateral securities demanded by the banks. Some of the banks even look at the scale of the farm before granting loans. The most alarming problem that the farmers do face is the high interest rates or bank charges. It is very difficult these days for the farmers to borrow money from the rural banks because of the high interest rates. More of the farmers do even end up by selling their lands or assets in order to pay the loans they have borrowed. This research will therefore look at the impact of rural banks on farmers in the rural areas.

The main aim of the study is to identify the impacts of rural banking on rural farmers.


The specific Objectives include;
i. To find out the importance that rural banks have on...

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