Determinants of Access to Agricultural Credits for Small Scale Farmers in the Southern Province of Rwanda

Abstract

peer reviewedThis study investigated the determinants of financial inclusion for small scale farmers by focusing on the access to formal and informal agricultural credits in the Southern Province of Rwanda. Data were collected from 310 farmers from Huye and Nyamagabe districts through an open-ended structured questionnaire and analysed using the binary logistic regression method. The major findings, on one hand, showed that among the requested and approved agricultural loans, 87.2% and 12.7% were from informal and formal financial institutions respectively. Among those who accessed agricultural credits, 59.7% were from Huye and 40.3% from Nyamagabe. On the other hand, it was revealed that the household characteristics and the community attributes are the most important determinants. Those household characteristics include household income and expenditure, Ubudehe socio-economic category of the household, off-farm employment and the size of the land owned by the household whereas community attributes involve residence area, transport and informal financial services availability. Regarding farmer characteristics, the education level was found to be the only factor affecting the smallholder farmers' access to agricultural credit. In light of the findings, it was recommended to conduct sensitization sessions focusing on the importance of agricultural credits for smallholder farmers especially in the areas with high level of poverty. In addition, there is need to work on alleviating the formal agricultural credits access barriers, and to conduct a study on the dynamics of informal and formal agricultural credits up take and usage by smallholder farmers to explore all dimensions of financial inclusion in the study area