Value Chain Governance and Access to Finance: Maize, Sugar Cane, and Sunflower Oil in Uganda

This note presents the maize, sugar cane, and sunflower oil value chains in Uganda. It analyzes the availability of finance within directed, balanced, and market governance structures in order to understand the relationship between governance and value chain finance. The study states that agents in the value chain must develop ways to effectively and efficiently screen and monitor clients and enforce loan contracts. Governance structure has an important impact on firms ability to achieve these tasks. Study findings include:

• Sugar value chains directed governance structure provides the lead firms with the ability to screen and monitor farmers, and to offer a credible threat of a serious sanction in case of default;
• Market governance structure of the maize and sunflower value chains does not allow for effective screening, monitoring or contract enforcement necessary for successful financial transactions within the value chain.

The study concludes that direct value chain finance may not be feasible in value chains with a market governance structure. Balanced and directed value chain governance structures provide greater opportunities to increase lending within the value chain to achieve expansion.