Determinants of Access to Formal Credit by Smallholder Tobacco Farmers in Makoni District, Zimbabwe

This study used data from 77 smallholder tobacco farmers from Makoni district in Zimbabwe to investigate factors affecting smallholder tobacco farmers’ access to formal credit. The results of the study showed that contact with extension services, farmer’s attitude towards risk of borrowing and ownership of land cultivated significantly and positively influenced the probability of farmers’ access to formal credit in the study area. These findings confirm that improving access to extension services and secure land ownership remain the important factors in the quest to improving access of smallholder farmers to formal credit in Zimbabwe. Improved access to information on credit use through extension services is also likely to positively influence farmers’ perceptions on credit risk, which would in turn reduce fears associated with formal credit sources. Encouraging farmers to insure both their crop and loans against the event of crop failure can also be used to reduce the risk associated with formal credit sources and help improve access to formal credit by a majority of smallholder farmers.