Rural development means the transformation of the subsistence agricultural production to a market-oriented agricultural economy. Availability and access to financial resources is one of the key elements to this transition and financial resource is a very important factor in economic development.
Farmer’s investment in modern technology is nothing without having in place organisations and systems that are capable of adequately providing rural financial services to farmers. So, the effort to develop agriculture could suffer in the absence of a strong financial base that aims at expanding access to credit for rural farmers.
We, therefore, need to review the operational performance of rural finance in Uganda, with the aim of drawing some lessons to explore innovative approaches for rural agricultural finance. We need to rehabilitate cooperatives and set up strong village associations.
Agricultural cooperatives play an important role in enhancing smallholder farmers’ livelihoods by strengthening their bargaining power. They are able to negotiate better terms in contract farming, resource sharing, lower prices for inputs or share costs for equipment, as well as providing cheaper financing, among others.
Prior to the 1990s, cooperatives were thriving and had State support. However, things took a bad turn when the government liberalised trade. Cooperatives were encouraged to become commercially autonomous. They collapsed because of corruption and heavy dependency mentality on government’s support.
Now we need farmer’s cooperatives that are member-owned, controlled and financed. The government needs to find a clear way of working and supporting these cooperatives but should minimise its involvement in the running of the cooperatives’ affairs.
For instance, the government needs to create a conducive environment that will promote the growth of cooperatives which are autonomous, provide effective regulation and supervision, provide start-up kits and basic logistical support for capacity-building, etc.
Once the ground is well levelled for farmers’ cooperatives to operate smoothly, agricultural productivity will increase. This will alleviate poverty in our rural areas where agriculture often employs the greatest portion of the population.