Access to Credit and Household Welfare in Rural Rwanda

Edouard Musabanganji

Working Papers from African Economic Research Consortium

Abstract: Rwanda is a densely populated developing country where many people depend on agriculture but lack access to credit. The country has low agricultural productivity, along with high levels of income inequality and food insecurity. Studies have shown that credit access can improve rural agricultural household welfare. Over the years, the governments policies have substantially improved financial inclusion. However, poverty levels remain high particularly in rural areas. This study investigates the drivers of participation in the credit market and the effect of credit access on dietary and food diversity scores, as well as household spending. It utilizes data from 6,183 rural households obtained from the 2015 National Comprehensive Food Security and Vulnerability Analysis survey. It analyzes the effect and drivers of access to credit on rural household total monthly expenditure, food consumption score and dietary diversity score as the outcome variables. The study applied the Endogenous Switching Regression, Propensity Score Matching, and Coarsened Exact Matching techniques. The estimation yields consistent results and reveals that access to credit is positively affecting the welfare of rural households as it induces an increase of the household consumption expenditure of borrowing households. The study does not reveal a significant linkage between access to credit and the household food consumption score. The findings suggest increasingsensitization sessions and awareness on the importance of credits.

Date: 2025
New Economics Papers: this item is included in nep-agr, nep-fdg and nep-fle
Note: African Economic Research Consortium
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