Smallholder Farmers’ Perceptions towards Agricultural Credit in Tanzania

Agricultural sector plays a pivotal role in the Tanzanian economy in such a way that it qualifies as the major trigger of sustainable and robust growth of the country’s economy. Though agriculture in Tanzania is largely under small scale, smallholder farmers earn little income and therefore demand credit necessary to initiate farming and adopt new technology. Hence, demand for agricultural credit is the willingness and ability of farmers to access existing sources of funds to meet farm investment needs. This study therefore aimed at assessing the smallholder farmers’ perceptions towards agricultural credit in Morogoro municipality, Tanzania. Rational choice theory was used in this study and given priority due to its importance in explaining the access of financial services as attributes of the individual heavily influence credit demand by smallholder farmers. A multi-stage sampling technique involving purposive sampling of 10 wards out of 29 wards based on their potential in crop production and presence of credit services was adopted, followed by a simple random sample of 300 smallholder farmers randomly chosen from the selected wards. The primary data were collected using questionnaire, interviews, Focus Group Discussion (FGD) and observation from the 300 sampled farm households in the study area while secondary data were obtained through documentary book reviews, ward office reports, online internet materials and journal articles. Findings show that, smallholder farmers’ attitude towards risk associated with agricultural credit were highly perceived by the majority of them. Also, results showed that inaccessibility of credit information, lack of education, bureaucratic procedures (i.e., lending procedures) and high repayment rate i.e., price of loan were perceived to be the main challenges that affected smallholder farmers’ decisions to demand and access agricultural credit from MFIs (Microfinance Institutions). Therefore, the perception of smallholder farmers that the application procedures are cumbersome and take a long time for the applicant to get a feedback, is having a negative influence on the probability of their demand for credit from MFIs. The study recommends education provision to smallholder farmers on agricultural credit use and improved market information systems. Also, credit institution should ensure effective provision of information on agricultural credit to boost their credit services to smallholder farmers.