Determinants And Characteristics Of Household Demand For Smallholder Credit In Malawi

It has been argued that most of Malawi’s smallholder farmers are too poor to benefit from any kind of credit, and that, even if they had access to adequate credit and inputs, their land constraints are so severe that any increase in productivity would fall short of guaranteeing their food security. The underlying objective is to analyze the factors that affect household demand for credit. The aim is to provide a better understanding of the households’ personal characteristics, not only because they influence the household’s demand for credit but also due to the fact that potential lenders are likely to base their assessment of borrowers creditworthiness on such characteristics. The study covered 404 households in Nkhotakota, Rumphi, Dedza, Dowa and Mangochi. The analysis was conducted using three methods, first, descriptive analysis to determine the relationship between participation in credit markets and socio-economic characteristics. Secondly, an Ordinary Least Squares estimation of the extent of credit demand and finally, a probit analysis. Estimated coefficients for family size and seasonality (post-harvest, post-harvest and harvest periods) were positive and significantly different from zero at p