. he cannot change the weather. he cannot prevent turbulences. he cannot prevent hurricanes, floods, draughts or earthquakes. financial markets are like the atmosphere. there is a meaningful similitude between the two. interacting forces in the markets, as in the atmosphere, are abundant. like the meteorologist, the central banker has to come up with equally wonderful equations for forecasting purposes and sustaining a stable financial market. no wonder astro - physicists and other engineers turn out to be the professionals with the right skills for financial markets. but unlike the meteorologist, the central banker ’ s job is to prevent turbulences and earthquakes in the financial markets. he is constantly tested by conditions in the financial markets. make a mistake. you get soon penalized by the market. but make no mistake. the job is not at all about tucking files from one table to the other. central bankers are often viewed as a ruthless class of people. they are often misunderstood. any central banker, made of a solid central banking timber, is religiously guided by the unwritten principles of having to conduct the business of central banking in ways that best serve the interests of the economy and the society at large, regardless of the aspersions, often very caustic, cast at him. the humility of central bankers has seldom been an occasional act ; it ’ s more of a constant attitude. but it ’ s cast off and dismissed lightly. the central banker is instead labelled as arrogant. it ’ s an optical illusion. quite often, this perception, as amply discussed in central banking literature, leads to clashes with the elected representatives of the people. whereas the central banker, by the very nature of his responsibilities, takes a long term view of the economy, the elected representatives of the people take a short term view, shaped and limited by the length of their tenure of office. this is quite understandable for they don ’ t get elected on the basis of their beautiful political philosophies. however, it does not go to say that central bankers always have a highly polished cartesian rationalism with an impeccably faultless idea of reality. although i have had years of experiential learning in the art of central banking, i, like a couple of my predecessors, have not been exempt from such clashes. one of the virtues of independent central banks is that, unlike politicians, they do not have to pay attention to opinion polls. perhaps, that ’ s why elected representatives

with, a holistic long term approach. such an approach should have four key components. the first, and probably most important in the early stages of agricultural development, is to provide agricultural extension services which can reach the majority of smallholders throughout the countryside and provide advice on the adoption of good agricultural practises and the optimal crops to be grown, given the characteristics of their farms, as well as postharvest handling and storage. agricultural extension services must be supported by good agricultural research. both agricultural extension and agricultural research have the characteristics of public goods, because the dissemination of agricultural knowledge from one farmer to another means that social benefits exceed private benefits. hence, they should be subsidised through the government budget. the second component of a holistic agricultural strategy should be to strengthen land rights. as in many african countries, land tenure systems in uganda are often complex and the ownership or usufruct rights of farmers are often unclear and insecure. this deters farmers bis central bankers ’ speeches from making long term investments in land improvements and it is also an impediment to access to formal sector credit, because land with unclear ownership is not suitable for loan collateral. the third component is better rural infrastructure, especially rural feeder roads. the commercialisation of farming is impeded by the high costs of transporting farm inputs and outputs, from farm gate to and from the market, because of poor roads. high transport costs drive down farm gate prices of farm output and drive up input prices, which undermine the commercial viability of farming. more public investment in the construction and proper maintenance of rural feeder roads is essential to support the modernisation of smallholder agriculture. the fourth component is improved access to finance. as i noted earlier, this may not be the binding constraint for many smallholders, especially subsistence farmers. access to finance will only benefit those farmers who have the knowledge and capacity to use purchased farm inputs to raise their productivity in a manner which generates profits and which does not expose them to a potentially ruinous level of risk. this probably currently applies to only a minority of smallholders in the country, although the number of smallholders who could benefit from finance should rise substantially if the other constraints to agricultural modernisation are effectively tackled. in formulating policies for the development of agricultural finance best suited to support the modernisation of smallholder farming it is necessary to address two important questions : what specific type of financial services do smallholder farmers need? and what types of financial institutions are most