Bridging credit gaps for sustainable agriculture: The role of rural savings and credit cooperatives among smallholder farmers

Despite the recognised benefits of climate smart agriculture (CSA) in enhancing farmers' adaptive capacity to climate risks, adoption rates remain low in Sub-Saharan Africa. This disparity can be attributed, in part, to the significant challenges smallholder farmers face in accessing credit from the formal financial sector. In response, Rural Saving and Credit Cooperatives (RUSACCOs) have emerged as crucial sources of funding for both household expenses and agricultural activities. However, despite their increasing importance in improving financial inclusion, little is known about whether participation in RUSACCOs can help alleviate existing credit constraints and promote the adoption of CSA among smallholder farmers. To address this knowledge gap, we employ a recursive bivariate probit (RBP) and propensity score matching (PSM) analysis using data from 400 randomly selected smallholder farmers in Zambia. The analysis controls for three main sources of endogeneity: program placement, endogenous covariates, and self-selection. Our findings indicate that participation in RUSACCOs has the potential to mitigate farmers' credit constraints by 42% and facilitate CSA adoption by 25%. Notably, the alleviation of existing credit constraints is associated with a 14% increase in CSA adoption. These results underscore the previously overlooked role of RUSACCOs in promoting agricultural sustainability. By effectively addressing financial inclusion barriers and providing access to practical agricultural knowledge, RUSACCOs can contribute to reducing the vulnerability of agriculture while fostering sustainable production. Our study suggests that repurposing RUSACCOs to emphasise financial inclusion and promote access to agricultural learning platforms can yield triple benefits: agricultural, environmental, and livelihood sustainability.