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This study was conducted in order to determine the extent of access to formal credit in
rural Zanzibar and identify factors that influence smallholder farmers* access to formal
credit. It also aimed to assess the linkage between access to credit and the adoption of
agricultural technologies. In conducting the study, both primary and secondary data were
collected. In the collection of primary data, questionnaires were administered to 750
randomly selected smallholder farmers. The data collected were analyzed descriptively
and quantitatively. The results from the study reveal that outreach and access of formal
credit in the study areas is low. About 78% of sampled households were found to be
credit constrained. It was also revealed that 41% of the credit constrained households
were relatively members of the more poor group in the study areas, while only 10% of
the non-credit constrained belonged to this group. Furthermore, the study results suggest
that the number of times one has received formal credit, keeping livestock, having a bank
account, value of productive assets owned and household total income are important
factors in influencing smallholder farmers* access to formal credit. The findings also
show that the intensity of extension contacts, household size, and the value of productive
assets are important factors in influencing agricultural technology adoption among non
credit households, while the number of times one has ever received formal credit was
found to have more influences in inducing technology adoption among credit constrained
households. Based on these findings, it is recommended that smallholder farmers should
be availed the opportunities of getting repeat loans in order to improve their chances of
accessing credit in the formal credit markets and enhance adoption of agricultural
technologies. Farming households can as well be encouraged to diversify their income
sources within and away from agricultural activities through promotion of mixed farming
and off-farm activities. The need to develop a saving culture in the farming communities
is also crucial for ensuring the creation of sustainable and efficient financial system.
Furthermore, it is recommended that in order to enhance adoption of agricultural
technologies, extension services should be targeted to non-credit constrained households. |
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