Impact of village community bank loans on smallholder farmers’ household income in Kiteto District, Tanzania

Abstract

Purpose: The major purpose of this study was to investigate the impact of Village Community Bank (VICOBA) loans on smallholder farmers’ household income in Kiteto District, Tanzania.
Design/Methodology/Approach: The study involved 100 smallholder farmers who had accessed VICOBA loans. The study applied a cross-sectional survey design. In the case of the study approach, it was a mixed method. The data were solicited from smallholder farmers through questionnaire, in-depth interviews and FGDs. The collected data were analysed using regression analysis. Prior to data analysis, econometric tests for normality, multicollinearity and goodness of fit of the model were undertaken and no violation of regression model assumptions was found. Also, the reliability test using Cronbach’s Alpha was conducted and the coefficient (0.851) signifies that the data collection instrument was reliable.
Findings: The results of this study indicate that loan amount, interest rate, loan accessibility and transaction costs had a significant impact on smallholder farmers’ income. On the contrary, the grace period, repayment period and mode of repayment were not significant. The study findings
imply that the VICOBA loans had an impact on the income of smallholder farmers, and have improved their living conditions as well as assisted them to climb out of excessive poverty.
Implications/Research Limitations: This study used cross-sectional data to examine the impact of VICOBA loans on smallholder farmers’ household income in Kiteto district, Tanzania. Based on the scope of this study, the generalisation of results might not provide a good picture of how smallholder farmers’ income is influenced by VICOBA loans.
Practical Implications: The findings of this paper would be useful as will awaken the Government and other institutions fighting against poverty to formulate and integrate the VICOBA development framework into the National Poverty Reduction Strategy as well as to review and reformulate effective cooperative and microfinance policies and guidelines to make them friendlier and accessible to small holder farmers.
Originality/Value: Unlike previous studies, this study considers multi-dimensions of VICOBA oan such as loan amount, interest rate, loan accessibility, the sufficiency of the loan amount, the grace period given to a smallholder farmer, repayment period and mode of repayment, while
assuming conducive weather, stable economy and favourable agricultural market conditions for farmers to acquire needed inputs and sell their produce at relatively higher prices.