Abstract:
Inadequate access to finance by the farmers has been identified as one of the contributing factors to the paddy
cultivation, value addition and distribution of the country. Microfinance is a key policy strategy to solve the financial
difficulties that affect directly the paddy production. The purpose of this study was to identify and assess the problems
face by the paddy farmers in using microfinance facilities for their production, processing and selling activities.
Primary data were collected through a survey from a sample of 40 paddy farmers and 10 government and non
government (NGO) microfinance institutions in Anuradhapura District. Potential problems faced by the lenders and
borrowers were analyzed by using the student t test statistical analysis tool. The perceptions of paddy farmers
towards the constraints identified were not vary with respect to their age group, education, farming experience and
gender. Higher interest rates, collateral requirements, strict repayment structures and high competition were the
main constraints that faced by both paddy farmers and microfinance institutions. Government and non government
authorities have to make policies to remove the constraints which hinder the accessibility to microfinance facilities by
paddy farmers as well as to remove the barriers face by the financial institution within sector.
