PRIVATE CAPITAL FORMATION ACTIVITIES AND BANK CREDIT ACCESS AMONG FARMERS IN ZIMBABWE

Blessing Ropafadzo Chigunhah,Gerald Munyoro,Ignatius Govere,Ezekia Svotwa,Tendai J Mabvure

doi:10.32479/ijefi.9751

Abstract

Bank credit is indispensable for commercializing and modernizing the agricultural sector in developing economies like Zimbabwe, where agriculture is the key pillar of livelihoods. This study sought to establish the relative importance of private capital formation activities as drivers of bank credit access among farmers in Zimbabwe. A structured questionnaire collected data from a sample of 372 respondents. Garrett's Ranking Technique and SPSS were used to rank the capital formation activities, whilst Friedman Tests (with Wilcoxon's Signed Rank Post-hoc tests) were used to determine the statistical significance of the rankings. Credit history, which falls under social capital was the most important driver of bank credit access among the farmers, followed by agricultural production qualifications and skills. Farm assets and business management skills were the third and fourth most important catalysts of bank credit access, whilst social networks were the least important. Hence, farmers are implored to uphold integrity in honouring their loan obligations consistently, pursue agricultural production and business management skills, and invest in productive physical assets on and off the farm. Policy should also address the land tenure issue to stimulate on-farm capital investments, and intensify knowledge enhancing agricultural extension services to improve agricultural production knowledge among farmers.

Highlights

Bank lending is the most common source of external finance for the bulk of SMEs and entrepreneurs for their start-up, cash flow and investment needs (OECD, 2015)
The study’s key informants that included eight (8) commercial banks and four (4) Agritex officers participated in the ranking of the capital formation factors as catalysts of bank credit access
The study’s key informants that included 8 commercial banks and 4 Agritex officers participated in the ranking of the capital formation factors as catalysts of bank credit access among farmers, based on their actual experiences as lenders and agronomists who worked closely with the farmers

Summary

Introduction

Bank lending is the most common source of external finance for the bulk of SMEs and entrepreneurs for their start-up, cash flow and investment needs (OECD, 2015). Bank credit availability empowers farmers to acquire all the resources that they need for enhancing production, income and livelihoods (Makamure et al, 2001; Rahji, 2000). Most policies devised by the government of Zimbabwe like the 99 Year Lease Agreement, the Collateral Registry and Command Agriculture have been directed towards addressing, and in some cases circumventing the collateral deficiency problem among farmers. The key question is, why are the farmers in Zimbabwe failing to access bank credit, and has anything been done to capacitate them to fulfil what the banks want? Most policies devised by the government of Zimbabwe like the 99 Year Lease Agreement, the Collateral Registry and Command Agriculture have been directed towards addressing, and in some cases circumventing the collateral deficiency problem among farmers.

Methods

Results

Conclusion