The Future of Smallholder Farming in Eastern Africa - Uganda ...

Table 17--Traders’ perception of the availability of market information by district
District
Number of traders reporting that:
Availability of market Availability of market
information is better since information is worse since
liberalization
liberalization
They cannot tell
whether it is better or
worse
Migori 58 2 0
Mbeere 45 1 6
Trans
35 19 0
Nzoia
Nairobi 31 13 12
Source: Authors’ survey, 2001.
The traders suggested that measures such as formation of a maize traders organization,
accurate and reliable market information relayed through the print and electronic media, and
provision of up-to-date market information by the Ministry of Agriculture through the market
information bulletins would go a long way toward improving the flow of market information.
Limited public market information results in asymmetric information and is one of the
institutional issues affecting efficiency of markets in Africa (Dorward, Kydd, and Poulton
1998; Gabre-Madhin 1998; Fafchamps 1999; Jayne et al. 1997). Provision of market
information is an area in which the state can play a key role in improving market efficiency
and general economic development.
3.3.5 Availability of Credit
This study establishes that there are few opportunities for maize traders to receive credit,
from either banks or other sources. As shown in Figure 7, most traders obtained initial
capital to enter the maize trade from other businesses and from agricultural activities.
Of the 22 traders who responded to the question about the source of credit, 32 percent
obtained it from commercial banks, 27 percent from cooperative societies, 9 percent from
fellow maize traders, 14 percent from informal moneylenders, and 18 percent from relatives.
The study shows that few wealthy traders extend credit to maize farmers or to other traders
and regular customers on mutual agreement. There was no evidence of an established wellfunctioning
informal credit system. More than 82 percent of the traders interviewed said they
do not get adequate credit. Any cash credit obtained is mostly from relatives or other traders.
Formal bank credit to traders is very rare mainly because of high interest rates and collateral
requirement.
Forty-six percent of the interviewed traders, however, reported that availability of credit is
better now than in the preliberalization era, 32 percent said that credit availability had
worsened, and 22 percent were not sure. As shown in Figure 8, the traders cited high interest
rates, short or no grace period in loan repayment, and the collateral requirement as the major
problems experienced in acquiring credit. The interviewed traders made a number of
suggestions on how the problem of credit can be solved: 38 percent cited reduction of interest
rates, 31 percent wanted to be given an adequate grace period, 18 percent wanted more loan
schemes to be formed, and 13 percent argued that with removal of loan security demands
(guarantors and collateral requirements) credit problems could easily be solved.