Microfinance Services and Performance of Smallholder Coffee Entrepreneurs in Central Region of Uganda

Abstract

Coffee is the main export of Uganda and its contribution to attaining the country’s vision 2040 cannot be overlooked. Coffee is mainly produced by smallholder entrepreneurs who have several resource constraints that limit coffee production. Accordingly, different stakeholders have implemented various programs to promote a solid microfinance industry as a key funding source for smallholders coffee entrepreneurs. However, coffee productivity in terms of yields has remained low which limits smallholder coffee entrepreneurs’ business earnings and hence their performance. As a consequence, this research investigated the effect of microfinance services, in particular, financial training, microcredit, saving mobilization, and farm inputs on the performance of smallholder coffee entrepreneurs in the central region of Uganda. It also sought to examine government regulations as a moderating variable for the association amidst microfinance and the performance of smallholder coffee entrepreneurs in the central region of Uganda. The study was guided by the resource-based view supported by dynamic capability, and contingency theories. A semi-structured questionnaire was adopted and piloted with 20 respondents who did not form part of the final survey in the Mayuge district. The explanatory research design was adopted to elicit data from a study population of 611,782 with a sample of 400 smallholder coffee entrepreneurs who were singled out by the use of a multi-stage random sampling strategy. Content analysis, descriptive and inferential statistics were utilized in analyzing data. A multiple linear regression model was employed and showed the effect of microfinance services on the performance of smallholder coffee entrepreneurs. Findings were presented in form of percentages, frequencies, means, and standard deviations and were displayed using tables, pie charts, and graphs. Study findings noted that financial training, microcredit, saving mobilization, and farm inputs were statistically significant and positively influence the performance of smallholder coffee entrepreneurs. Furthermore, the findings also established that government regulations negatively moderate the association between microfinance services and the performance of smallholder coffee entrepreneurs. The study recommends that microfinance institutions should increase the frequency of financial training, make microcredit more available, relax restrictions regarding irregular saving and also reduce the interest rates on fertilizers provided to smallholder coffee entrepreneurs. This will allow smallholder coffee entrepreneurs to appreciate and use various microfinance services that will subsequently increase their business performance.