Determinants of access to farmers’ organization input credit among smallholder sugarcane farmers in Tanzania: A case of Kilombero Valley

Abstract

Agricultural financing is imperative for enhancing agricultural productivity and rural development in general. There have been several efforts from the government and other stakeholders in private sectors and non-governmental organizations to enhance input credit access to rural farm households. However, rural input credit market imperfection remains a predominant barrier, making, input credit access among smallholder farmers a less understood phenomenon. In this paper, the determinants of input credit access by smallholder farmers in Kilombero valley, Tanzania are analysed based on a cross-section survey involving 274 randomly selected smallholder sugarcane farmers. Applying the double-hurdle econometric approach, the study found that farm size, age, education, years of membership to farmers organization, and distance from farm to the factory as significant factors determining the probability of smallholder farmers accessing input credit. Similarly, fertilizer, membership to farmers organization, and distance from farm to the factory were significant determinants of the intensity of input credit access. The findings imply that policies that strengthen the rural input credit market are imperative for reducing transaction costs and easing liquidity constraints for purchasing critical agricultural inputs such as fertilizer, pesticides and improved seed varieties. The government should invest in financial literacy programs for smallholder farmers to help them understand credit options, manage their finances effectively, and use credit for productive purposes this is due to the fact that many smallholder farmers have primary level of education. However, limitation of this study is application of cross-sectional design, thus, a longitudinal study may offer a better option for causal-effect analysis.