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

Table 2.23: Brokers’ opinion about the quality of storage and rental
charges
Quality of storage Number %
Adequate or average 48 82.8
Poor 10 17.2
Rental charges
Expensive 34 56.7
Fair 25 41.7
Cheap 1 1.7
Source: Survey, 2002.
Table 2.24: Incidence of damage in storage
Response Number %
Yes 19 48.7
No 20 51.3
Total 39 100.0
Source: Survey, 2002.
In general, there is a very limited effort to store and sell grain during the lean months.
Brokers resort to short-term storage only when they are unable to sell. Regional traders often
end up losing money if the grain is not sold directly from the truck and must be unloaded,
stored, and loaded for sale at a later date. With too few wholesalers or speculators with
sufficient capital to store, the search for buyers is intense and downward pressure on prices is
unavoidable, especially at harvest time when there is surplus supply in the market. Lack of
adequate storage facilities and high storage charges, in addition to the limited number of
wholesalers or speculators, explains why brokers resort to credit sales to dispose of unsold
grain. Continuous price decline in recent years has also rendered storage activities
unprofitable. Intervention is required to improve storage facilities and develop the credit
market in order to encourage wholesale and temporal arbitrage.
2.3.3. Access to credit
Brokers’ access to credit from formal banks is highly limited: 94 percent of the sampled
brokers reported that they had not borrowed money from formal banks in the preceding 12
months (Table 2.25). The high collateral requirement is the major constraint to accessing
finance from formal sources. Informal sources of finance are also limited: only about 36
percent of the brokers used such sources (e.g., borrowing from friends and relatives) to run
their business. Use of own finance is essentially the only means to conduct brokerage and
other activities. Many of the sampled brokers are members of iqubs (rotating saving and
credit associations, ROSCAs), and each broker deposits, on average, birr 276.4 per week,
with an average total iqub value of birr 28,342.90.