DETERMINANTS OF SMALLHOLDER FARMERS ACCESS TO FORMAL CREDIT IN RWANDA

Abstract

While formal credit is believed to enhance productivity and promotes standard of living by breaking vicious cycle of poverty and also considered to be an essential input in increasing agricultural productivity it remains limited to many smallholder farmers in Rwanda. Despite this, there is still limited studies on the determinants of smallholder farmers’ access to formal credit. The main focus is to determine factors that affect smallholder farmers accessing credit facilities, identify discrepancies between rural and urban areas in accessing formal credit and also determine whether there is a gender gap in accessing credit facilities as well as gaps between different wealth groups. The data used in this study was drawn from the FinScope Rwanda 2016 survey conducted in 2015/2016 by Centre for Economic and Social Studies (CESS) and approved by the National Institute of statistics of Rwanda (NISR). Standard binary logit technique was deployed to assess the factors determining smallholder farmers’ access to formal credit. Among the findings is that households which are headed by male and female headed household are not statistically significant. However, the study revealed that there is discrepancies in smallholder farmers living in urban and rural areas in accessing formal credit and also the difference in wealth groups in accessing credit from the formal sources was statistically significant. The study recommends improving transportation infrastructures such as roads, telecommunication, and other infrastructures in different areas to make financial services providers more accessible across the provinces.