Determinants of Agro-credit Repayment of Small- Holder Farmers in Tanzania

Abstract

The study investigated the determinants loan repayment in the two selected districts of Kongwa in Dodoma region and Kilombero in Morogoro region of Tanzania. The objective of the study was to identify the determinants of agro-credit repayment of small-holder farmers in Tanzania. The main problem in this study is the existence of high rates of non-compliance to Agrocredit transactions among smallholder farmers. Primary data were collected with the aid of structured questionnaire and key informants. Using a multistage sampling procedure, a total of 329 loan beneficiaries in the four segments namely; commercial banks, microfinance institutions (MFIs), government institutions and moneylenders were purposively and randomly selected and interviewed in the two districts. A Logistic (logit model) regression analyses were carried out to isolate and examine the determinants of loan repayment from the respondents' perspective. Findings revealed that the variables of farm size, type of crop, farming experiences, interest rates, and multiple borrowing were the main determinants of loan repayment. The findings also revealed that credit default rate was caused by high interest rates and loan access’ denial from commercial banks due to lack of bankable collaterals. The evidence from the analysis of the study indicating that farmer’s credit repayment is based on many factors which statistically proved significantly in both inferential and descriptive findings. Therefore, the study recommended the need for government to support the establishment of central collateral registry sometimes referred to as secured transactions which will unlock credit to smallholder farmers and assure them access to credits from both formal and informal sources at relatively low interest rates.