Assessing the Impact of Agricultural Development Fund (ADF) Credit on Agribusiness Income in Nangarhar Province, Afghanistan

Abstract

Access to agricultural credit is widely recognized as a cornerstone for improving agriculture and rural development, particularly in economies with limited resources. This study examines the impact of the Agricultural Development Fund (ADF) credit, on agribusiness performance in Nangarhar Province, Afghanistan, while also identifying the major constraints farmers face in accessing formal credit. Primary data were collected through a structured survey of ADF agribusiness clients and analyzed using descriptive statistics, paired-sample t-test, Cohen’s d and the Cobb-Douglas production function. Likert-scall assessments were additionally employed to capture clients’ satisfaction with credit services. The finding revealed that ADF credit substantially improved agribusinesses income, with statistically significant increase observed in average annual earnings following credit access (p <.001). The estimated effect size (Cohen’s dz = 0.70) falls within the medium-to-large range. Result from the Cobb-Douglas model indicate that capital (elasticity = 0.60) had a stronger effect on income growth then labor (elasticity = 0.40), highlighting the importance of credit in enabling capital intensive investment. Despite these positive outcomes, several institutional constraints limited broader participation. Collateral requirements and complex application procedures emerged as the most critical barriers, although clients generally appreciated staff behavior. Promoting credit institutions, simplifying lending procedures, introducing flexible collateral mechanisms, and prioritizing production and processing activities are recommended measures for enabling agricultural finance to effectively support agricultural development in Nangarhar Province, Afghanistan.