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Determinants of Microfinance Demand (Evidence from Chiredzi Smallholder Resettled Sugarcane Farmers in Zimbabwe)

Author

Listed:
  • Simion Matsvai

    (Small-Scale Agribusiness and Rural Non-Farm Enterprise Research Niche, Department Business Management and Economics, Faculty of Economic and Financial Sciences, Walter Sisulu University, Private Bag X1, Mthatha 5117, South Africa)

Abstract

Despite the MFI insurgency, agricultural financing remains critically low, even though microcredit is widely accepted as both a substitute and compliment to formal credit. Zimbabwe is an agro-based economy and very little is known about the determinants of microcredit demand and microcredit size in smallholder resettled sugarcane farmers. Research is concentrated in short-term agriculture activities. Thus, this study aims to fill the unattended gap in lagged returns agriculture activities such as sugarcane production which takes at least a year to mature, hence, the greater need for agriculture financing alternatives such as microfinance. The study examined the determinants of both microcredit demand and loan size (magnitude of microcredit participation) by smallholder resettled A2 sugarcane farmers in Chiredzi. Primary data from 370 smallholder resettled sugarcane farmers (214 borrower participants and 156 non-borrower participants) were used. Probit and Tobit regression models were used for data analysis in STATA. Operational costs, interest rate, grace period, and land size significantly affect both the demand for microcredit and microcredit size, while education, household farming assets, extension services, and payback period significantly affect microfinance demand, and risk attitude/perception additionally determine microcredit size. Special microfinance schemes best suitable for the agriculture sector and crop/plant-specific agriculture financing schemes, currency, and macroeconomic stability are the major policy recommendations.

Suggested Citation

  • Simion Matsvai, 2024. "Determinants of Microfinance Demand (Evidence from Chiredzi Smallholder Resettled Sugarcane Farmers in Zimbabwe)," Sustainability, MDPI, vol. 16(22), pages 1-21, November.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:22:p:9752-:d:1516801
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    References listed on IDEAS

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    3. David R. Mason, 2014. "Who Gets What? Determinants Of Loan Size And Credit Rationing Among Microcredit Borrowers: Evidence From Nicaragua," Journal of International Development, John Wiley & Sons, Ltd., vol. 26(1), pages 77-90, January.
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    5. Simion Matsvai & Abbissynia Mushunje & Simbarashe Tatsvarei, 2022. "Technical efficiency impact of microfinance on small scale resettled sugar cane farmers in Zimbabwe," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2017599-201, December.
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