Navigating Financial Barriers: Examining Agricultural Credit Accessibility for Smallholder Paddy Farmers in Mvomero District, Tanzania

Abstract

Access to agricultural credit is critical for the economic sustainability of smallholder farmers, particularly in developing regions like Tanzania. However, many smallholder paddy farmers in Mvomero District face significant barriers when trying to secure financing essential for improving productivity and livelihoods. This study investigates the enablers and obstacles influencing agricultural credit accessibility for these farmers. Using a mixed-methods approach, data were collected from 274 farmers and key informants, revealing that prior loan experience plays a significant role in facilitating credit access, with 80.7% of respondents indicating previous loan engagement. Additionally, secure land ownership was found to correlate with better credit terms, as those with formal titles reported a mean score of 3.12, highlighting the importance of land tenure in their borrowing experience. Despite the high level of engagement with credit markets, considerable challenges remain, with mean scores of 2.98 and 3.14 suggesting that interest rates and collateral requirements are perceived as substantial barriers to accessing credit. Furthermore, trust and reputation emerged as pivotal factors in loan procurement, with 73% of farmers expressing willingness to seek additional credit, which reflects a generally positive outlook on borrowing. These findings underscore the urgent need for tailored financial education programmes and supportive policies aimed at enhancing lending practices and improving access to capital for smallholder farmers in the region.