Financial innovations and their implications for consumption of agricultural finance among smallholder farmers in Uganda: the case of Centenary Bank

A thesis submitted to the Directorate of Research and Graduate Training for the award of the Degree of Doctor of Philosophy of Agricultural and Rural Innovations of Makerere University

Agricultural finance consumption in Uganda is evolving as innovations address barriers for smallholder farmers' use of financial services. The application of financial innovation was expected to improve the development process, enhance the quality of innovations, and streamline delivery to smallholder farmers. It was also intended to increase understanding of the life goals of smallholders that influence their consumption. Although financial innovations aimed at improving agricultural finance to 25% of industry lending, smallholder farmers still account for a relatively small share of agricultural finance. Low usage is attributed to several factors, including a one-size-fits-all product approach, inflexible and discriminatory policies by FIs, high sector risks, dispersed demand, high service costs, land rights issues, and inefficient delivery processes. The study holistically assessed the agricultural finance consumption of smallholder farmers. It examined agricultural finance innovation pathways, product types, delivery mechanisms, and life goals shaping product usage. The study was anchored in agricultural innovation system theory and actor-network theory. These frameworks generated insights into processes, delivery structures, and actor-network interactions. Marketing theory (7Ps Market mix framework) clarified how product nature and delivery influence use. Expectancy-value theory helped elicit product characteristics, developing hierarchical value maps linking products to outcomes and life goals sought through agricultural finance. The study employed a qualitative design, utilising case studies to provide contextual, in-depth knowledge of Centenary staff and smallholder farmers. Data was collected through focus groups and key informant guides. Results showed that the development of financial innovations followed a non-farmer-led, complex, six-stage process handled by diverse actors, with gaps in research representation. The nature of the product, pricing, and inefficient processes hindered the use of finance by smallholder farmers. Goals like financial security, love and belonging, social security, and self-esteem drove decisions to use agricultural finance.