Factors influencing SEDA agricultural credit rationing to smallholder farmers in Dodoma Municipality and Bahi District, Dodoma, Tanzania

Abstract

This study was conducted with the aim of assessing factors that influence SEDA agricultural credit rationing to smallholder farmers in Dodoma Municipality and Bahi District. Purposive and random sampling techniques were employed in selecting 200 smallholder farmers. Binary logistic and linear regressions models were used to analyse the influence of farmer’s socio-economic characteristics on credit demand and factors influencing SEDA agricultural credit rationing respectively. Descriptive statistics were used to assess the performance of SEDA credit scheme. Variance in Difference (DID) was used to assess the contribution of credit to farmer’s income. The results of binary logistic indicate that extension service, household size, average hired labour cost and information on SEDA existence influenced credit demand at 1% level of significance. In addition, linear regression indicated that amount of savings, experience with SEDA credit, and physical distance from SEDA office influenced credit rationing significantly at 1% level of significance. Furthermore, as loan repayments, the overall repayment rate was 97%, 98% and 96%, 95% for Dodoma Municipality and Bahi Districts at the end of 2010 and 2011 seasons respectively. DID results reported borrowers to have higher mean income over non borrowers by TZS 141 005 and TZS 186 980 in Dodoma Municipality and Bahi District respectively. It is concluded that a package of interventions is needed for improving farmers socio-economic characteristics prior for securing SEDA agricultural credit facility. This may call for some changes in SEDA lending policy and empowering smallholder farmers in order to remove supply and demand side barriers in SEDA credit system.