The Effect of Agricultural Credit on Commercialization Level of Smallholder Rice Farmers in Mvomero District, Tanzania

Abstract

This study examines the impact of agricultural credit on the level of commercialization among smallholder rice farmers in Mvomero District, Tanzania. Agricultural credit is a crucial factor in enhancing productivity and commercialization, enabling farmers to invest in better inputs, technology, and practices. This research employs both descriptive and inferential statistical analysis techniques. Propensity Score Matching (PSM) was used to analyze the effect of access to credit on the level of commercialization. Additionally, factors influencing the commercialization of smallholder rice farmers were determined using Multinomial Logistic Regression. The findings indicate that farmers with access to credit are 24% more likely to commercialize compared to those without credit. This is achieved through adopting improved farming techniques, increasing their scale of production, and engaging more extensively in market-oriented activities. Moreover, the level of commercialization is positively influenced by access to credit out of other factors such as sex, farm size, farming experience, education level, and farmer’s age. The study concludes that while agricultural credit positively affects commercialization levels, there is a need for more tailored financial products and supportive policies to enhance credit accessibility for smallholder farmers in Mvomero District. These findings have important implications for policymakers, financial institutions, and development agencies aiming to promote agricultural commercialization and rural development.

Keywords: Agricultural credit, Smallholder farmers, commercialization

DOI: 10.7176/JESD/16-2-06

Publication date: March 30th 2025