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Agricultural Finance and the Youths: Prospects for Financial Inclusion in Uganda

This paper provides a comprehensive assessment of the current state of financial inclusion of the rural youth in Uganda, with a specific focus on their engagement in the agricultural sector and the financial services that are available to them to pursue their business ventures in this area. Youth Savings Groups have proven to be a key element in fostering the financial inclusion of young entrepreneurs. They can be an essential entry point to provide financial services to rural youths and mitigate lending risk by employing a solidarity group approach. Digital financial solutions are by far the most critical entry point to foster the youth-led financial inclusion, so the available options should be expanded. Young entrepreneurs usually lack “conventional” forms of guarantees required to unlock loans, which can significantly impair their ability to access credit. Therefore, new lending approaches should be developed that do not exclusively rely on traditional collateral. To foster expansion of agent banking, policymakers should address agent approval processes and financial literacy among rural dwellers. Moreover, ministry should leverage the expertise on youth-focused provision as well as eliminate policy barriers that impose unnecessary limitations to access financial services. Furthermore, there is a pressing need for improved data collection practices, as well as more effective data structuring and dissemination, related to financial flows in Ugandan agriculture. The use of improved agricultural technologies, coupled with tailored access to investment capital, adequate public support and awareness-raising, can help to attract the new generations in engaging the agricultural sector with a renewed entrepreneurial mindset. There is a need to modernize and restructure the agricultural sector in order to create substantial value addition across value chain flows, while properly matching the demand for processed food in local and international markets.

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