Characterization of Smallholder Farmers and Agricultural Credit Institutions in Rwanda
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Date
2021-01
Authors
N . K, Taremwa
I, Macharia
Bett, E
Journal Title
Journal ISSN
Volume Title
Publisher
Ajfand
Abstract
The significance of access to agricultural credit in perpetuating agricultural productivity
is unquestionable, because it is a means to achieving optimal productivity. The
minimization of any barriers to agricultural credit access should, thus, be a global
priority. One of the most significant and current barriers to agricultural credit access is
information asymmetry which results into mutual distrust between lending institutions
and borrowers in this case the smallholder farmers. To address information asymmetry,
both the lending institutions and borrowers need to have definitive descriptive
information about either party. Without the profiling of institutions and potential
borrowers, an information gap persists, thereby increasing mutual distrust. This study
addresses that gap, in the context of Rwanda by characterizing smallholder farmers and
agricultural credit institutions. A cross-sectional survey design was used in this study
with smallholder farmers and staff in agricultural credit institutions in the Eastern,
Western, and Central provinces of Rwanda as the units of analysis. A multistage
sampling procedure was used, with stratified sampling of administrative levels spanning
from province (stage 1) to districts (stage 2) and sectors (stage 3), followed by a simple
random sampling of cells per sector, and the convenience sample of households. Staff in
the financial institutions were purposively sampled. The data collected was analyzed
using principal component analysis and cluster analysis with the K-means statistic (SPSS
version 25). The largest cluster of smallholder farmers has the following characteristics:
household size of 1 to 5 people, farmers with education, owning arable land not
exceeding a hectare, with more than five years of farming experience, earning from other
off-farm activities, with no dependents under five years of age, and renting less than an
acre of land. As for agricultural credit institutions, the largest cluster has following
compositions: have mechanisms or measures established for managing loan defaults with
the majority using refinancing, rescheduling, and collateral release, with variable loan
payback options, and provide targeted agricultural credit to farmers such as agricultural
input premium. The research findings are particularly pertinent for maize- and ricegrowing farmers, and how to reduce the information gap and the implications of
broadening access to credit to smallholder farmers were discussed This study
emphasizes the need for characterization for both parties to be better informed about the
characteristics and dynamics of each other, all in a bid to lessen asymmetric information
and thus improve access to credit
Description
A Research Article in the Afr. J. Food Agric. Nutr. Dev.
Keywords
Smallholder farmers, Characterization, Agricultural credit institutions, Information asymmetry
Citation
aremwa NK. Macharia, I., Bett, E., 2021. Characterization of smallholder farmers and agricultural credit institutions in Rwanda, Afr. J. Food Agric. Nutr. Dev