Factors affecting access to finance by Smallholder Farmers in Zambia

Siwale, Mwaya

Factors affecting access to finance by Smallholder Farmers in Zambia

Master Thesis

2019

Abstract

About seventy-seven percent of Zambia’s citizens who are engaged in primary activity in the agriculture sector are poor (Economies, 2017). One of the ways in which the poverty levels can be reduced is by lessening constraints of access to finance in agriculture sector. The implications of the low access to credit in the agriculture sector is reduced productivity, high food insecurity and perpetual poverty particularly in Zambia’s rural areas. Most of the studies conducted focused on identifying factors which limit participation in agriculture finance from the bank’s perspective and not farmers. Therefore, this study sought to fill the gap and assess variables directly related to smallholder farmers access to finance. It further examines the dynamism of access to finance depending on location, gender and transport infrastructure. The data employed in the study was obtained from a survey conducted in 2013 by IAPRI and UNZA with a sample size of 1,231 households in six districts of Zambia. Agricultural credit for small holder farmers (SHFs) in rural areas is mostly provided in the form of cash or in kind through supply of inputs to these SHFs. This data was modeled based on the logistic regression. The results showed that 14.1% of the SHFs had access to finance. Among these farmers only 13% were female. In addition, secondary education, access to finance information, farm size, access to collateral and distance between the location of the farmer and the financial services, were significant factors in determining access to credit. A recommendation proposed to policy makers based on results presented include sensitization on various finance facilities available to rural farmers so that they are aware and can make necessary efforts to access the finance. Rural education is directly related to access to finance, therefore government should promote education for its citizens. Lack of collateral has been identified as a factor that gravely hinders access levels by most. Government should implement standardized policies that ensure availability of credit to farmers with little or no collateral. In conclusion, improved credit permeation in agriculture sector promotes sustainable and inclusive growth in Zambia and will eventually eradicate absolute poverty.