An Estimation of the Determinants of Microcredit Demand by Small Farmers to Enhance Agricultural Production: A case of Huye District, Rwanda

Microcredit was considered as a strategic empowerment tool that has talent to improve the well being of the poor and vulnerable especially small farmers. However, the low level of microcredit provision to small farmers is the fundamental issues hamper their agricultural productivity and income. The study estimates the determinants of microcredit demand by small farmers for enhancing agricultural productivity in Huye District, Rwanda. Primary data have been collected from 136 borrowers and 164 non-borrowers from several financial institutions. The data were analyzed using Tobit Regression Model. The results show that education, household size, total annual income, total annual expenditure, cooperative membership and distance were the main determinants of microcredit demand by small farmers to boost agricultural production in Huye District, Rwanda. However, in order to increase agricultural production and to improve small farmers’ livelihood, formal financial institutions should put more efforts to provide microcredit to small farmers. The Government of Rwanda and others stakeholders should organize trainings especially for rural small farmers to increase their skills and knowledge about the use and how to manage their loan expenditures much better.