Is value chain financing a solution to the problems and challenges of access to finance of small‐scale farmers in Rwanda?

Abstract

Purpose

The purpose of this paper is to demonstrate the relationship between value chain financing and access to finance of small‐scale farmers in Rwanda. The authors propose two models of access to finance and their correlation with improved productivity and therefore profit for producers was obvious. Value chain financing products in Mukunguli, southern Rwanda have improved the life of small‐scale farmers tremendously.

Design/methodology/approach

The paper is based on documentary reviews on value chain financing and direct interviews conducted with 122 farmers and staff from the microfinance institution. SPSS was used to analyze results from the field and actions are recommended for future prospects.

Findings

It was evident from the data collected from selected respondents that impact of the access to value chain financing products had a straight link to the levels of profit and production.

Research limitations/implications

Access to basic documentation was among the limitations of this paper. Furthermore, reliability of data collected from interviewers was open to question as it required deep analysis on some of the samples.

Practical implications

The paper includes implications of access to finance in agriculture sector through value chain financing products. The feasibility of the tested products had been approved, by both the financial institution and farmers. Value chain finance has improved the productivity and profits of farmers as well as the profit of the microfinance institution.

Social implications

The well being of small‐scale farmers has improved tremendously.

Originality/value

The paper is original in proving that value chain finance products can work in Rwanda – the first experience being in Mukunguli. It also proves that a microfinance institution can solve problems faced by small‐scale farmers in remote areas.

Citation

Kopparthi, M.S. and Kagabo, N. (2012), "Is value chain financing a solution to the problems and challenges of access to finance of small‐scale farmers in Rwanda?", Managerial Finance, Vol. 38 No. 10, pp. 993-1004. https://doi.org/10.1108/03074351211255182