Impact of access to credit on farm income: policy implications for rural agricultural development in Lesotho

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Date
2018-07-05
Authors
Donkor, Emmanuel
Ogundeji, Abiodun A.
Motsoari, Charmaine
Onakuse, Stephen
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Taylor and Francis Group (Routledge)
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Abstract
In this era of rapidly increasing food demand, a sustainable food supply is required to meet such demand. This suggests that capital investment through adequate access to credit is needed to develop the agricultural sector in developing countries including Lesotho. Therefore, this paper examined farmers’ access to credit and its impact on farm income using a three-stage model, namely: Probit, Tobit, and propensity score matching. The study was conducted in Lesotho with a sample size of 100 farmers. The empirical results reveal that access to credit increases net farm revenues by US$116.608 to US$136.894. Furthermore, savings, scale of production, membership of farmer associations and financial record keeping exert significant positive effects on access to credit, while higher interest rates reduce farmers’ likelihood of securing credit from a financial institution. We conclude that adequate access to credit is necessary to promote a sustainable agricultural development and the livelihoods of rural farmers in Africa.
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Keywords
Credit , Agricultural development , Lesotho , Credit , Propensity score matching , Probit
Citation
Ogundeji, A. A., Donkor, E., Motsoari, C. and Onakuse, S. (2018) 'Impact of access to credit on farm income: policy implications for rural agricultural development in Lesotho', Agrekon, 57(2), pp. 152-166. doi:10.1080/03031853.2018.1483251
Copyright
© 2018, Agricultural Economics Association of South Africa. This is an Accepted Manuscript of an article published by Taylor & Francis in Agrekon on 5 July, 2018, available online: https://doi.org/10.1080/03031853.2018.1483251