IDEAS home Printed from https://ideas.repec.org/a/ags/ajfand/340690.html
   My bibliography  Save this article

Determinants Of Participation In Agricultural Group Guarantee Loans: A Case Of Smallholder Farmers In Eastern Uganda

Author

Listed:
  • Ninsiima, R
  • Bulyaba, R
  • Makosa, D

Abstract

This paper establishes that agricultural group guarantee loans (AGGLs) are indeed an innovative tool used by Microfinance Institutions (MFIs) to extend credit to resource-disadvantaged smallholder farmers regarded as not credit-worthy by traditional lenders. It disproves popular literature that one requires assets to access formal credit and that extremely poor farmers are segregated from borrowing citing a lack of collateral to pledge to both group members and to the lender. This paper indicates that efforts to get smallholder farmers out of destitution should be redirected to addressing other group credit aspects other than increasing participation. Multi-stage sampling obtained 161 agricultural loan borrowers of Promotion of Rural Initiative Development Enterprises (PRIDE) microfinance, a formal Tier III credit institution in Uganda. Both borrowers of the group (AGGLs) and Individual (Individual Loan borrowers, IL) loans were selected for comparison purposes. Semi-structured interviews and in-depth discussions with farmer groups (focus group discussions, FGDs) collected both quantitative and qualitative data for the study. Descriptive statistics analysis presented the socioeconomic characteristics of the borrowers while the binary logistic regression model determined the factors that influence participation in AGGLs. The findings indicated that IL borrowers were better off in socioeconomic aspects such as income than AGGL borrowers. The study results revealed that the probability of participating in AGGLs decreases with an increase in the number of asset ownership and an increase in household expenses, particularly education. This implies that AGGLs are socially perceived to be a “facility for the poor”, supporting the motives of MFIs. Agricultural group guarantee loans are associated with smaller loan amounts due to fear of default. These smaller amounts limit investment and consequent income improvement. This is the first paper to study participation in AGGLs offered by a formal credit institution in Uganda. Other group loans offered in Uganda do not target agriculture, those that do, are offered by savings and credit cooperative organizations (SACCOs) informally started by farmers.

Suggested Citation

  • Ninsiima, R & Bulyaba, R & Makosa, D, 2023. "Determinants Of Participation In Agricultural Group Guarantee Loans: A Case Of Smallholder Farmers In Eastern Uganda," African Journal of Food, Agriculture, Nutrition and Development (AJFAND), African Journal of Food, Agriculture, Nutrition and Development (AJFAND), vol. 23(4), January.
    • Handle: RePEc:ags:ajfand:340690
    DOI: 10.22004/ag.econ.340690
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/340690/files/Racheal.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.340690?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Beatriz Armendáriz & Jonathan Morduch, 2010. "The Economics of Microfinance, Second Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262014106, April.
    2. Brandon H. Lee & Jeroen Struben & Christopher B. Bingham, 2018. "Collective action and market formation: An integrative framework," Strategic Management Journal, Wiley Blackwell, vol. 39(1), pages 242-266, January.
    3. Dereje Regasa & David Fielding & Helen Roberts, 2021. "Contestable Credit Markets and Household Welfare: Panel Data Evidence from Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 57(3), pages 484-501, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elikplimi K. Agbloyor & Simplice A. Asongu & Peter Muriu, 2021. "Sustainability, Growth and Impact of MFIs in Africa," Working Papers of the African Governance and Development Institute. 21/083, African Governance and Development Institute..
    2. Yong Li & Jing Li & Peng Zhang & Sunhwan Gwon, 2023. "Stronger together: Country‐of‐origin agglomeration and multinational enterprise location choice in an adverse institutional environment," Strategic Management Journal, Wiley Blackwell, vol. 44(4), pages 1053-1083, April.
    3. Bhuiyan, Muhammad Faress & Ivlevs, Artjoms, 2019. "Micro-entrepreneurship and subjective well-being: Evidence from rural Bangladesh," Journal of Business Venturing, Elsevier, vol. 34(4), pages 625-645.
    4. Srivardhini K. Jha & E. Richard Gold & Laurette Dubé, 2021. "Modular Interorganizational Network Governance: A Conceptual Framework for Addressing Complex Social Problems," Sustainability, MDPI, vol. 13(18), pages 1-21, September.
    5. Richard Harrison, 2013. "Crowdfunding and the revitalisation of the early stage risk capital market: catalyst or chimera?," Venture Capital, Taylor & Francis Journals, vol. 15(4), pages 283-287, October.
    6. Fall, François Seck & Tchakoute Tchuigoua, Hubert & Vanhems, Anne & Simar, Léopold, 2022. "Investigating the unobserved heterogeneity effect on microfinance social efficiency," LIDAM Discussion Papers ISBA 2022010, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    7. de Quidt, Jonathan & Fetzer, Thiemo & Ghatak, Maitreesh, 2018. "Commercialization and the decline of joint liability microcredit," Journal of Development Economics, Elsevier, vol. 134(C), pages 209-225.
    8. kemdong nicodeme TENEKEU, 2020. "Les déterminants de la pérennité des institutions de microfinance au Cameroun," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 11(1), pages 122-138, June.
    9. Morduch Jonathan, 2010. "Borrowing to Save," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-11, December.
    10. Sagamba, MoÏse & Shchetinin, Oleg & Yusupov, Nurmukhammad, 2013. "Do Microloan Officers Want to Lend to the Less Advantaged? Evidence from a Choice Experiment," World Development, Elsevier, vol. 42(C), pages 182-198.
    11. Aga, B.K. & Tesfay, G.B., 2018. "How Should Rural Financial Cooperatives Be Best Organized? Evidence from Ethiopia," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277735, International Association of Agricultural Economists.
    12. Dehejia, Rajeev & Montgomery, Heather & Morduch, Jonathan, 2012. "Do interest rates matter? Credit demand in the Dhaka slums," Journal of Development Economics, Elsevier, vol. 97(2), pages 437-449.
    13. Maria Margarida Avillez & Andrew Greenman & Susan Marlow, 2020. "Ethical Judgments About Social Entrepreneurship in Sub-Saharan Africa: The Influence of Spatio-Cultural Meanings," Journal of Business Ethics, Springer, vol. 161(4), pages 877-892, February.
    14. Islam, Asadul & Nguyen, Chau & Smyth, Russell, 2015. "Does microfinance change informal lending in village economies? Evidence from Bangladesh," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 141-156.
    15. Doering, Laura & Wry, Tyler, 2022. "The challenges of supporting necessity entrepreneurs: Understanding loan officer exit in microfinance," Journal of Business Venturing, Elsevier, vol. 37(2).
    16. Dhami, Sanjit & Arshad, Junaid & al-Nowaihi, Ali, 2022. "Psychological and social motivations in microfinance contracts: Theory and evidence," Journal of Development Economics, Elsevier, vol. 158(C).
    17. Anaïs Périlleux & Ariane Szafarz, 2022. "Women in the boardroom: a bottom–up approach to the trickle-down effect," Small Business Economics, Springer, vol. 58(4), pages 1783-1800, April.
    18. Jeroen Struben & Brandon H. Lee & Christopher B. Bingham, 2020. "Collective Action Problems and Resource Allocation During Market Formation," Post-Print hal-02927584, HAL.
    19. D’Espallier, Bert & Goedecke, Jann & Hudon, Marek & Mersland, Roy, 2017. "From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?," World Development, Elsevier, vol. 89(C), pages 19-33.
    20. Narda R. Quigley & Pankaj C. Patel, 2022. "Reexamining the gender gap in microlending funding decisions: the role of borrower culture," Small Business Economics, Springer, vol. 59(4), pages 1661-1685, December.

    More about this item

    Keywords

    Agribusiness; Agricultural Finance;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:ajfand:340690. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://www.ajfand.net/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.