Financial Literacy Level among Smallholder Food Crops Producers in Rural Area of Tanzania

Abstract

Financial literacy is a critical factor in advancing agricultural transformation, particularly among smallholder farmers who dominate  Tanzania’s agricultural sector and primarily produce food and cash crops. Despite its importance, limited access to credit remains a persistent challenge for these smallholder farmers. Financial literacy plays a key role in improving credit access; however, empirical data on the financial literacy levels of smallholder farmers in Tanzania is limited. The study aimed at examining the level and determinants of financial literacy among smallholder farmers who grow food crops in rural Tanzania, using secondary data from FINSCOPE 2023. A
total of 1,566 farmers were studied using a financial literacy framework based on the Organization for Economic Co-operation and development/International Network on Financial Education to find out their level of financial literacy and multiple regression analysis to discover factors affect it. Findings show that 62% of smallholder farmers exhibit low financial literacy, with an average literacy score of 0.50. Key determinants of financial literacy include age, income, education level, farm size, and exposure to financial education. The study recommends implementing rural outreach programs to enhance financial literacy to improve credit access and financial decisionmaking among smallholder farmers.