| dc.description.abstract | Access to credit plays a vital role in the agricultural sector, particularly for small-scale farmers, to enhance productivity, increase profitability, and stimulate economic growth. This study investigated the profitability of groundnut farmers in Kumi district and analyzed the impact of different credit options on their financial performance. The research adopted a mixed-methods approach, combining both quantitative and qualitative data. A representative sample of 70 groundnut farmers was selected and data was collected through surveys and interviews. The study assessed the financial viability of groundnut farming by analyzing key performance indicators, such as gross margin, net income, return on investment, and profitability ratios. Moreover, the study investigated the availability and utilization of credit options among groundnut farmers, including traditional informal sources, microfinance institutions, agricultural cooperatives, and government-sponsored programs. It examined the characteristics, terms, and accessibility of these credit options and evaluated their impact on farmers' profitability. Factors affecting credit access, such as collateral requirements, interest rates, loan repayment terms, and credit management practices, are also explored.
Findings revealed that access to credit significantly influences the profitability of groundnut farmers in Kumi district. 77.1% of the respondent’s accessed credit from various credit options and 22.9% did not access credit. 45.45% of the males accessed credit from the banks and the rest accessed from SACCO, Micro finance and other financing options. The highest percentage of females (33.33%) accessed credit from SACCO and banks. Those who received extension services 44.19% of them accessed credit from banks followed by SACCO with 37.21% while those who did not receive extension services were equally distributed in credit access from the three financing options that is banks, micro finance and others with 27.27% each financing options. The highest percentage of the married respondents accessed credit from banks (38.71%) followed by SACCO (32.26%). Mean total land holding was 5.82 acres per household while the proportion of land under groundnuts production had a mean of 2.51 acres. Total land holding of the respondents was 407 acres of which 176 acres were under groundnuts production which is about 43.24% of the total land. Ground nuts farmers in Kumi district earned fairly high gross profit in 2021. Factors like age of respondent and cost of hiring labor using local financing were significant factors influencing profitability levels of farmers that access credit from different credit options while others were not significant. Profitability of groundnut farming in the study district didn’t depend on the financing options but rather depended on the farming experience as observed in farmers of the mean age 42.25 and also the cost spent on hiring labor and farmers utilizing formal credit options tend to achieve higher yields, adopt improved farming practices, and generate greater profits compared to those relying solely on informal credit sources. However, challenges related to credit availability, affordability, and accessibility persist, especially among marginalized farmers. Limited financial literacy, inadequate collateral, and complex bureaucratic procedures hamper the effective utilization of credit options. Consequently, the study recommends policy interventions to address these barriers, such as enhancing financial literacy programs, streamlining loan application processes, and promoting innovative credit models tailored to the specific needs of groundnut farmers. This study contributes to the existing literature on agricultural finance and rural development in Uganda by providing empirical evidence on the profitability of groundnut farming and the impact of different credit options. The findings can guide policymakers, financial institutions, and development agencies in designing targeted interventions to improve credit access, facilitate sustainable agricultural growth, and enhance the livelihoods of groundnut farmers in Uganda. | en_US |
