Impact of Micro-Credit on the Productivity of Small-Scale Farmers in Bagamoyo District, Tanzania

Abstract

This study investigates the impact of micro-credit on the productivity of small-scale farmers in Bagamoyo District, Tanzania. While micro-credit programs have expanded in rural areas to improve financial inclusion, their contribution to agricultural productivity remains poorly understood at the local level. A cross-sectional research design was employed, collecting data from 120 smallholder farmers selected through a multistage sampling technique. Both quantitative and qualitative data were obtained using structured questionnaires, key informant interviews, and focus group discussions. Descriptive statistics and multiple regression analysis were applied to examine the relationship between access to micro-credit, input adoption, and crop yields. The findings revealed that 62% of farmers accessed credit in the past three years, primarily from VICOBA and SACCOS. Credit users reported significantly higher adoption of improved seeds (78%), chemical fertilizers (64%), and hired labor (70%) compared to non-users. Consequently, crop yields were higher among credit users, with maize, cassava, and vegetables showing 35%, 20%, and 38% increases, respectively. Regression results confirmed that micro-credit had a statistically significant positive effect on productivity (p < 0.05). Despite these benefits, farmers faced challenges such as high interest rates, delayed loan disbursement, small loan sizes, and limited financial literacy, which constrained the full potential of micro-credit programs. The study concludes that micro-credit contributes positively to smallholder productivity but requires institutional and operational improvements. Recommendations include expanding affordable credit schemes, providing financial literacy training, aligning loan disbursement with cropping seasons, strengthening collaboration with extension services, and developing flexible credit products tailored to smallholder needs.