Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 309

Full Length Research Paper

The determinants of credit demand among farmers in Hurungwe District of Mashonal and West Province in Zimbabwe

Chigunhah Blessing R.
  • Chigunhah Blessing R.
  • Graduate Business School, Chinhoyi University of Technology, Zimbabwe
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Svotwa E.
  • Svotwa E.
  • Department of Crop Science and Post-Harvest Technology, School of Agricultural Sciences and Technology, Chinhoyi University of Technology, Zimbabwe.
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Munyoro G.
  • Munyoro G.
  • Graduate Business School, Chinhoyi University of Technology, Zimbabwe
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Govere I.
  • Govere I.
  • Department of Agriculture Economics, Education and Extension, Faculty of Agriculture and Environmental Sciences, Bindura University of Science Education, Zimbabwe.
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  •  Received: 24 February 2020
  •  Accepted: 31 March 2020
  •  Published: 01 April 2020

Abstract

Bank credit availability in the agricultural sector empowers farmers to adopt modern technologies and inputs that are vital for breaking poverty in developing economies like Zimbabwe. This study sought to establish the determinants of credit demand among farmers in Hurungwe District of Mashonaland West Province in Zimbabwe. A questionnaire survey was conducted on a sample of 354 farmers selected by stratified random sampling. The Direct Elicitation Approach was applied to comprehend the credit demand constraints faced by farmers using frequency statistics. Logistic Regression Analysis and Thematic Analysis were also used for analysing data. Farmers in Hurungwe District face price (95%), risk (79%) and transaction cost (58%) constraints. Interest rates, collateral and fear of debt have a negative and significant (p<0.05) effect on credit demand. Loan processing time emerged as another key determinant of credit demand among farmers. Policy should curb hyperinflation to ensure the affordability of loans and production inputs by farmers. Interest rate ceilings must also be restored, and financial markets literacy campaigns intensified to shield farmers from predatory lenders. Banks are challenged to improve communication with farmers, swiftly address their needs and relax collateral demands to enhance credit demand among farmers. Investments in irrigation and other weather resilience technologies should be prioritized to enhance agricultural sector performance and reduce credit uptake fears among farmers.

 

Key words: Collateral, constraints, credit demand, direct elicitation, investments, thematic analysis.