Factors influencing smallholder farmers’ access to formal financial services in Morogoro Region, Tanzania

Abstract

This study was conducted to evaluate smallholder farmers’ inclusion to formal financial services in Mvomero, Morogoro Rural and Kilosa districts, in Morogoro region, Tanzania. Specifically, the paper was set to analyse the socio-economic factors that influence the access to formal financial services in the study area. A sample of 240 respondents was covered by the study, whereby multistage random sampling was employed to select respondents in the study area. The data were coded and analyzed with the aid of Statistical Package for Social Sciences (SPSS) computer software. A binary logistic regression model was used to test the effects or influence of socio-economic factors on inclusive formal financial services. Results showed that socio economic factors such as age, income, education, occupation and distance to formal financial institutions affect the access and use of formal financial services (p<0.05). The study has also revealed that savings services are popular therefore, used by the majority of adult population, followed by transaction services, credit, then insurance services Conversely, the study concludes that cost of services, ignorance, low income were among the reasons mentioned by the respondents as hindering inclusion to formal financial services in the research area. To this effect the study recommends effective linkages between financial institutions in order to increase the proportion of people with financial access, capacity building to financial institutions, improving infrastructure, improving condition and quality of financial services and to offer finance education to the people.