Digitalization and agricultural transformation in developing countries: Empirical evidence from Tanzania agriculture sector

Abstract

Agribusiness can potentially increase value for agriculture and the entire value chain, but it is hard to achieve these goals without digitalising the sector. The transformation reforms modern technology and digital infrastructure adoption to facilitate growth and inclusivity. These conditions make the agricultural digitization transformation more appealing. Therefore, using a survey of 400 smallholder farmers in four regions of Rukwa, Ruvuma, Morogoro and Tabora, this study examines the interplay between digitalization and agriculture transformation in Tanzania by focusing on the determinants and effects of digitalization on smallholder farmers' welfare. The study used the double hurdle model to estimate the determinants and extent of digitalization adoption; the Two-stage least square (2SLS) and the Control function approach (CFA) to estimate its effects on smallholder farmers' welfare. The findings revealed that access to credit (0.17428, p < 0.01), extension services (0.52884, p < 0.01), education and government support (0.10922, p < 0.05) are key determinants for agricultural digitalization. Moreover, digitalization was found to influence smallholder farmers' welfare significantly. The benefits of digitalization across smallholder farmers in all regions were observed in enhancing extension services (76.50 %), pest management (71.25 %), and accessibility of the market information (72.25 %), enhance an access to financial services (74.75 %). In sum, to promote digital technology adoption among smallholder farmers, policymakers in Tanzania and developing nations should prioritize financial inclusion through tailored microfinance programs, educational initiatives must integrate digital literacy, enhance extension services, subsidized technology access, and encouraging public-private partnerships to create incentives for sustainable agricultural development.