Access to finance is one of the most critical constraints faced by Hawaii Island’s agricultural producers. Traditional lenders are often reluctant to extend credit to small-scale farms due to perceived risks, and the high cost of capital further discourages investment in agriculture. According to the 2022 USDA report, few producers reported using formal loans, relying instead on personal savings or informal borrowing from family and friends. This lack of access to finance limits the ability of smallholders to invest in essential inputs, equipment, and infrastructure, thereby constraining growth and productivity.
To address these challenges, innovative financing solutions, such as microloans, cooperative financing, or crowd-funding models, are needed. Programs like the USDA’s Value-Added Producer Grants (VAPG) have provided some relief, but these need to be expanded to better meet the needs of smallholders. Additionally, partnerships between financial institutions and agricultural cooperatives could reduce the risk perception associated with lending to farmers, making finance more accessible. Improved access to finance would have a significant impact on other system functions, including the ability to invest in infrastructure, input supplies, and processing facilities.