Effect of credit access on income among small scale youth tomato farmers in Mvomero District Tanzania

Abstract

Despite the potential that the agriculture sector holds to contribute to reducing the high unemployment levels among the youth, the sector remains largely untapped. Youth farmers struggle to get access to credit for agricultural activities, which is critical for the purchase of inputs and setting up of agricultural investments. This study looked into the effect of access to credit on income among small-scale youth tomato farmers in Mvomero district, Tanzania. Tanzania is largely endowed with arable land and favourable weather conditions for agricultural production. The first objective sought to determine the perceptions of youth on the process of accessing credit from lending institutions. The second objective reviewed the determinants of credit access and the third objective analysed the impact of credit on income. A sample of 562 youth were interviewed for the study and the data analysed using STATA software. For the first objective the exploratory factor analysis (EFA) was used and the findings show that youth perceive the process of seeking and applying for credit as cumbersome and the procedures complex. The second objective was analysed using the binary logit regression model and the results found that level of education, years of farming experience, land size, gender, group membership, and distance to lending institutions were significant in determining access to credit. The third objective was analysed using the propensity score matching technique (PSM). The PSM results show that access to credit increases farm income as it allows the purchase of quality inputs and investment in farm activities. Additionally, income from farmers borrowing from formal institutions was higher than those acquiring loans from informal channels. In conclusion, uptake of agricultural credit among youth farmers can be increased through financial literacy, youth-friendly packages, and simplified and inclusive loan application and requirements. Further research is proposed to explore other factors that can enhance youth engagement in agriculture and the impact of access to credit across various value chains.