Evaluating the Smallholder Farmers’ Perceptions towards Agricultural Credit in Morogoro Municipality, Tanzania

The agricultural sector is crucial to Tanzania’s economy, serving as a key driver of sustainable and robust economic growth. However, despite its importance, the sector is predominantly small-scale, with smallholder farmers who struggle with low incomes. This economic reality drives a strong demand for agricultural credit, which is essential for enabling farming operations and the adoption of new technologies. Agricultural credit demand represents farmers’ willingness and ability to access financial resources to meet their investment needs. This study sought to evaluate the smallholder farmers’ perceptions towards agricultural credit in Morogoro municipality, Tanzania. The study was grounded in rational choice theory, which was given priority due to its relevance in explaining access to financial services, as individual attributes significantly influence credit demand among smallholder farmers. The theory assumes that smallholder farmers choose the most favorable option based on their preferences among the available alternatives. A cross-sectional research design was employed incorporating a mixed research approach. A multi-stage sampling technique involving two stages was used. In the first stage, the study purposively selected 10 out of 29 wards based on their potential in crop production and the presence of credit-providing institutions. Subsequently, 300 smallholder farmers were randomly selected. Both primary data and secondary data were used. Primary data collected from 300 smallholder farmers were descriptively analyzed using the SPSS version. 25. The study findings revealed that larger farm sizes necessitate more labor, which in turn increases the demand for capital, often sourced through credit. However, the study identified several challenges perceived by smallholder farmers that hinder their access to agricultural credit. These challenges include the risk associated with agriculture credit, limited access to credit information, lack of education, bureaucratic lending procedures, and high loan repayment rates. The perception that application procedures are cumbersome and time-consuming was particularly noted as a deterrent, which negatively impacts farmers’ likelihood of seeking credit from MFIs. The study concludes by recommending targeted interventions to enhance smallholder farmers' access to agricultural credit. This includes educational programs focused on the effective utilization of credit, as well as improvements in market information systems. Furthermore, financial institutions are urged to enhance the dissemination of information regarding agricultural credit, thereby improving their service delivery and supporting the financial inclusion of smallholder farmers.