How a Sectoral System of Innovation Influences Access to Agricultural Finance

Chonya, Nyangu Samuel (2024). How a Sectoral System of Innovation Influences Access to Agricultural Finance. PhD thesis The Open University.

DOI: https://doi.org/10.21954/ou.ro.00098028

Abstract

Farmers face unmitigated challenges in accessing agricultural finance in Zambia and Africa at large. Academic and policy debates have attributed these challenges as impeding access to agricultural finance. However, there is more to these challenges. The present study reveals interlinking failures between sectoral lead organisations and intersectoral actors, which leads to asymmetric information and reduced risk mitigation. This limits farmers' access to agricultural finance which minimises innovations given limited enhancement of knowledge bases in the essential functions of risk mitigation, technical expertise, financing, and marketing.

This thesis examines the construct of the cotton and coffee sectors in Zambia by empirically developing two qualitative case studies to determine how well the structure and operation can influence farmers’ access to agricultural finance and the manner in which they can innovate, generate, and improve knowledge flow. The empirical research applied the principles of the sectoral system of innovation. An integrated theoretical framework was developed from the literature of financial intermediation, the sectoral system of innovation and macroeconomics of agriculture, to explore the objectives and farmers’ access to agricultural finance.

In-depth interviews and document analyses were included in the collection of data to examine access to agricultural finance in the sectors, which reveal the need for enforceable legal and regulatory frameworks. Given the inability of most farmers to successfully provide collateral and other satisfactory documentation to pass due diligence when obtaining finance, there is a need for lead organisations in the sectors to intermediate, facilitate and provide innovative financing to farmers alongside existing financing provisions.