Determinants of access to agricultural credit among smallholder rice and maize farmers in the eastern and western provinces of Rwanda

Abstract

Agricultural credit is believed to play a catalytic role in enhancing agricultural productivity; however, its access is limited for smallholder farmers in Rwanda. To investigate this phenomenon, this study sought to identify and assess the determinants of access to agricultural credit among rice and maize smallholder farmers in Rwanda. The study was conducted in the eastern and western provinces of Rwanda using a cross-sectional survey design. Sample districts, sectors, and cells were obtained using stratified random sampling techniques. Convenient and purposive samplings were used to sample households and farmers, respectively. Data were collected using structured interviews and questionnaires, and were analyzed using a binary logistic regression model. Model results indicated that both individual and institutional factors determine access to agricultural credit among smallholder maize and rice farmers in eastern and western provinces of Rwanda. The individual
factors included: saving of money in commercial banks (Adjusted Odds Ratio (AOR) = 2.389), owning a size of land that is 0-0.1 ha (AOR = 0.127), and knowledge of the repayment terms of agricultural loans (AOR = 0.203), while the institutional factors included: having privately-owned finance institutions in the area (AOR = 0.287), offer of both long and short-term loans (AOR = 0.290), interest rate between 11-15% (AOR = 0.178), the process for obtaining agricultural credit not being too long (AOR = 2.026). Institutional factors were more important than the individual farmer characteristics in determining access to credit. Policy interventions aimed at bolstering agricultural credit access among the smallholder farmers should address institutional challenges such as information asymmetry and the lack of credit guarantees that hinder agricultural credit access.