Determinants of the demand for credit by smallholder farmers: survey results from South Africa

Joseph Chisasa

International Journal of Economic Policy in Emerging Economies, 2016, vol. 9, issue 1, 26-46

Abstract: Access to credit is one of the constraints facing smallholder farmers in South Africa. This paper investigates the factors that determine the demand for credit by smallholder farmers. Survey data from 362 respondents from Mpumalanga and North West Provinces was used to estimate the credit demand function using multiple regression analysis of the ordinary least squares (OLS) method. Age, marital status, farm inputs such as fertiliser, seed, pesticides and tractors and machinery were observed to have a positive and significant influence on the demand for credit. Education portrayed a strongly negative relationship with the demand for credit suggesting that the less educated the farmer is, the lower the propensity to borrow. It is argued that the complexity of the credit application process makes it less appealing to prospective borrowers. Similarly, the coefficient for interest rates was negative and significant. However, gender, farm size, distance to the bank and labour were found to have no influence on the demand for credit. These results have important policy implications.

Keywords: smallholder farmers; credit demand; smallholdings; South Africa; ANOVA; credit access; ordinary least squares; OLS; age; marital status; fertilisers; seed; pesticides; tractors; agricultural machinery; education level; credit application complexity; interest rates; gender; farm size; bank distance; labour; agriculture; bank credit. (search for similar items in EconPapers)
Date: 2016
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