Investigating the Agricultural Finance Sources, Access and the Factors Affecting its Demand

Abstract

The current study examined key factors influencing farmers’ demand for agricultural finance. It followed a mixed-method approach, with men and women making up an equal half of the sample. The data was gathered using focus groups, structured interviews, open-ended/close-ended and key informant interviews (KIIs). Descriptive statistics, along with logit and multinomial logit models (MNLM), were employed to analyse the data to determine the socioeconomic characteristics of the respondents, the sources, availability, and access to credit, and the pertinent factors that influence credit demand. The findings showed that about 49% of the respondents obtained credit, with males availing more. The respondents mainly preferred formal and semi-formal sources, however, the males preferred formal sources while the females preferred non-formal sources. The variables with a substantial impact on credit demand were identified as being education, financial literacy, family size, and group participation. Further, according to the credit sources, the following factors have a significant impact: (a) formal sources: education level, financial literacy, deposits, knowledge of credit sources, marital status, and household size; (b) informal sources: education level, deposits, household size, and group membership; and (c) non-formal providers: education, gender, and group membership.