Abstract

The Village Savings and Loan Associations (VSLAs) are among the many innovations that can improve the prevalence of financial inclusion, especially among the rural population. The main objective of this study was to determine whether participation in Village Savings and Loan Associations (VSLAs) can influence the creation of employment opportunities among smallholder farmers in Uganda. This study relied on secondary data collected from 653 smallholder farmers between July and August 2022 from beneficiaries and non-beneficiaries of aBi-supported projects engaged in maize, coffee, and beans production value chains. A student t-test was conducted using STATA to characterize the smallholder farmers, while regression analysis was used to address the second and third objectives. The study findings indicate that the gender of the household head, gross margins received from the crop enterprise, average monthly savings, and total annual loan volume, but not membership in a VSLA, are significant predictors of the number of jobs created by smallholder farmers. This study finds that an increase in average monthly savings by Ush 1 million per smallholder farmer increased employment by 2.3 FTEs per household. Similarly, an increase in the volume of loans received per annum by Ush 10 million per smallholder farmer increases jobs by 1.1 FTEs per household. Therefore, VSLAs with ample and attractive saving and loan portfolios may be sufficient prerequisites to create more jobs. However, since most smallholder farmers are already resource-constrained, these findings suggest that promoting a conducive macroeconomic environment for formal financial institutions to provide credit to VSLAs is the most viable policy intervention governments and their development partners can undertake in developing economies.

Key words: Village Savings and Loan Associations (VSLAs), credit, ordinary least squares, employment, full-time equivalent (FTE), jobs.