Financing and marketing horticultural exports in Uganda

This study assesses financial and other issues associated with such an expansion. It analyzes the flow of commodities from producers to consumers through various production and marketing channels, the methods used to finance transactions, and existing financial patterns. The study shows that horticultural commodities in Uganda are produced by two types of producers: a few large producers, who concentrate on the overseas market and sell surplus and rejects in domestic and regional markets, and many small producers, who mainly serve the domestic market, although some contribute to exports through outgrower contracts. Formal agricultural credit represents only about 4% of total agricultural output, with most of it going for marketing activities, and medium and large farmers easily absorb the small amount of funds allocated for production. As a result, most producers must self-finance or use informal finance. Further, nontraditional agricultural exports are perceived as being exceptionally risky and are even more credit-rationed than other farm enterprises. Government and donor programs to fill this credit gap and encourage small outgrowers have yet to show real impact. Other problems affecting horticultural exports include poor transportation infrastructure, inadequate research and extension, and nascent or non-existent producer and exporter associations. Four areas are recommended for further study: (1) incentives to encourage investment in outgrower systems rather than plantations; (2) the mechanics and results of outgrower financing schemes such as that recently initiated by the Bank of Baroda; (3) programs that provide information to potential investors and promote joint ventures with foreign investors; and (4) government investment in public goods that benefit all firms, e.g., cooling facilities, transportation infrastructure, but are beyond the ability of any single firm to provide. Includes references.