Impact of agricultural value chain financing smallholder farmers’ livelihoods; case study: Rwanda rice value chain financing illustrated by Coopriki- Cyunuzi cooperative based in Gatore sector, Kirehe district, Rwanda eastern province

Abstract

Agriculture continues to be the backbone of economic system of developing economies and it is the predominant source of livelihood for people in the developing world, including Rwanda. It provides food, raw materials to the industrial sector, incomes and employment opportunities to a very large part of the rural population. Therefore, the Agriculture sector becomes the priority among others of those developing countries.“Agriculture Value Chain Finance (AVCF) approach” has been reveiled very important in developing sustainable agricultural systems, expanding rural incomes, alleviating poverty and promoting financial inclusion, especially of the smallholder farmers engaged in agriculture activities. This research study entitled “ Impact of Agricultural Value Chain Financing on Smallholder Farmers’ Livelihoods” presents opportunities and constraints that smallholder farmers are bearing in expanding their livelihoods by accessing to formal financial services through AVCF in rural areas. The case study is the rice cooperative called: “COOPRIKI-CYUNUZI: Coopérative des Riziculteurs de Kibaya- Cyunuzi”, based in Gatore Sector, Kirehe District of Rwandan Eastern Province. This research study is developed around three main research questions:(i)Are the existing alternative financial mechanisms, risk mitigation products and economic models for Value chain Finance approach work efficiently to raise the productivity and income growth for smallholder farmers? (ii)Which constraints are limiting smallholder farmers’ accessing finance in Agricultural Value Chain model, and what can be done by stakeholders to overcome those constraints? How AVCF can impact the livelihoods of smallholder farmers and what should be the roles of different stakeholders in promoting this approach? The research is made up of five chapters. Chapter One provides the general introduction to the whole research project, and talks about the research problem, objectives, questions, scope of work, significance, theoretical framework, research design and methodology, and the thesis structure. Chapter Two is the literature review about the AVCF approach, financial tools and instruments, business models, main constraints in AVCF, etc. This chapter also reviews the case study: Rwanda Rice Value Chain Financing illustrated by COOPRIKI-CYUNUZI rice growers cooperative located in Kirehe District, in Eastern Province of Rwanda. Chapter Three shows the targeted population and sample, sampling techniques, methods and techniques that were used for data collection, data analysis, results’ interpretation and presentation. In this regards, the targeted population was made up 2.856 smallholder farmers growing the rice paddy in Kibaya and Cyunuzi marshlands, and members of COOPRIKI-CYUNUZI. The “convenience sampling” method was used to select a sample of 50 respondents within the cooperative and 5 other people from supporting institutions (development projects and FIs). Both qualitative and quantitative methods were used, a questionnaire was used to collect data, and coding process was used for results interpretation and presentation. Chapter Four talks about description and Impact of Agriculture Value Chain Financing on Smallholder Farmers’Livelihoods/Rwanda Rice Value Chain Financing presentation of data collected, and comments on findings. In conclusion, in Chapter Five, research findings and recommendations made to different stakeholders were used to answer the main research questions raised at the beginning of this research study, in Chapter One. Summary of findings of this research work were: COOPRIKI-CYUNUZI works in AVC model : the cooperative is linked to inputs suppliers. The cooperative supplies rice paddy to differents rice milling companies, and works with few Financial Institutions. Both farmers and FIs expressed that farmers encountered constraints to access formal credit,such as: lack of collaterals, lack of guarantor, high interest rates, lack of skills to develop bankable proposals, etc. COOPRIKI-CYUNUZI received both Government and Developement Agencies’s financial support in forms of grants and Capacity building, as well as loans from few FIs. Farmers acknowledged that the financing received, even insufficient have impacted positively their lives’ standards. They acknowledged that by engaging them in rice production and working with FIs at some extent, they have increased access to health services, education services for their children, have acquired new assets (cattle, goats, motorcycle, have rehabilitated their houses, etc). At the light of those research’s findings, the researcher formulated some recommendations to different stakeholders for the AVCF to work more efficiently and provide a positive impact on livelihoods of smallholder farmers: Governments, through police makers should take the lead by enabling a working environment for the AVCF through its registration, promoting financial inclusion, and providing directions to other stakeholders. Supporting agencies (Donor Programmes, NGOs and Development Programmes) have to take their facilitation role and make sure that the financial system provides adequate finance to AVC actors that meet demands arising from activities along the value chain through capacity building of smallholder farmers, promoting business models and enhancing sustainable market linkages between chain actors. Finally, FIs have to play their role of expanding their lending opportunities in rural areas.They should promote easy access to financial services by smallholder producers and other value chain actors by availing sweetable financial products to meet their different needs along the chain.