Effects of agricultural value chain financing on potato productivity and market access on farm household’s livelihood in Musanze and Nyabihu Districts, Rwanda

Abstract

Potato (Solanum tuberosum L.) is an important crop that plays a major role in food security and poverty reduction in Rwanda. However, lack of adequate agricultural financing approach remains the major challenge to low production and increased poverty, especially for smallholder farm households and other actors in potato value chain. The general objective of this study was to contribute towards the increased potato productivity and improved access to potato market for enhancing the smallholder farm households‟ livelihood in Musanze and Nyabihu Districts, Rwanda. The research has used quantitative survey to collect data from 585 smallholder potato farm households consisted of 275 (47.01 %) users of agricultural loans while 310 (52.99 %) non-users of the agricultural loans in their potato activities. With STATA 16 and SPSS 16, data were analysed using descriptive statistics. Probit model estimates, Propensity score matching, Endogenous switching regression and Double Hurdle and Multivariate Probit Models were also used. The study discovered that the household head‟s age, household head‟s education level, the distance to the produce market, household income, and membership to farming organizations all had a significant and positive influence on the farmers‟ decisions to participate in and use of agricultural financing approaches. Farming experience, household head‟ sex and marital status and had a negative and significant influenced the farmers‟ decisions to participate and use of agricultural value chain financing. The study found that farm households that allocated credit to potato production harvested 5.150 metric tons while those who did not allocate credit to potato production harvested 1.658 metric tons, which makes 3.492 metric tons (211%) more than them. Furthermore, the findings revealed that that the household head‟ sex, and membership to farming organizations increased the farm householder‟s willingness to participate in the potato market. It also found that the probabilities for farm households to sell to processors, brokers, wholesalers, retailers and consumers were -15.2 %, -88.4 %, -116.8 %, , -24.9 %, and -82.8 % respectively, while the probabilities to sell to collection centres and cooperatives were 76.1% and 32.3% respectively. The study revealed that there is 0.13 % likelihood for farmers‟ choices to sell to all the seven market outlets and 3.7 % of not selling to the seven market outlets simultaneously. The study recommended policy makers‟ interventions for developing loan products, affordable interest rates suitable to the desires and capabilities of farmers and creating a well-structured market system that enables smallholder farmers to access to the market information. Potato farmers would also upgrade their education in farming systems and marketing so as to produce and deliver quality produces.