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An Economic Assessment of the Factors Influencing Smallholder Farmers' Access to Formal Credit: A Case Study of Rwamagana District, Rwanda

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  • Muhongayire, Wivine

Abstract

Farm credit enhances productivity and promotes standard of living by breaking vicious cycle of poverty of small scale farmers. It is usually considered as an essential input to increase agricultural productivity. Agricultural credit is indeed an integral part of the process of modernization of agriculture and commercialization of the rural economy. Credit is a necessary input if agriculture intensification and agricultural growth is to be achieved. Despite financial institutions having been established to offer agricultural credit in Rwanda, access to credit in many rural households in Rwanda remains limited. This study assesses the factors influencing smallholder farmers’ access to credit in Rwamagana District, Rwanda. The study sought to establish the relationship between formal and informal credit use and to assess the factors that influence smallholder farmers’ access to formal credit. It was hypothesized that informal credit participation is negatively associated with formal credit use and that access to credit is not determined mostly by household socio- economic and institutional factors such as land, agricultural extension service, gender. Both primary and secondary data were used in the analysis. Multi stage sampling technique was used. A sample of 185 smallholder farmers stratified by access to formal credit was drawn. The data for the survey was collected in the month of May, 2011. Both t-test and Chi-square test statistics were used to compare users (33 percent) and non users of formal credit (67 percent) with respect to the explanatory variables hypothesized to influence access to formal credit. Binary Logit is applied in assessing the factors influencing smallholder farmers’ access to formal credit.

Suggested Citation

  • Muhongayire, Wivine, 2012. "An Economic Assessment of the Factors Influencing Smallholder Farmers' Access to Formal Credit: A Case Study of Rwamagana District, Rwanda," Research Theses 198522, Collaborative Masters Program in Agricultural and Applied Economics.
    • Handle: RePEc:ags:cmpart:198522
    DOI: 10.22004/ag.econ.198522
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