Effect of agricultural credit on agricultural productivity in Tanzania

The main objective of the study was to examine the determinants of access to credit and its effect on agricultural productivity. In order to attain this objective, the study uses Tanzania National Panel Survey data of 2012/13 and adopts Logit model to determine access to agricultural credit among smallhoder famers, also uses Tobit to determine its effect on agricultural productivity. The result shows that the household size, farm size, education of the household head, and non-faming income are significant factors determining access to credit. Furthermore, credit has a positive impact on agricultural productivity. Other factors such as labour, farm size and inorganic fertilizer have also a positive effect on agricultural productivity. This positive relationship between credit and agricultural productivity implies that availability of credits enables the farmers to purchase better quality or high yield variety seeds, fertilizers and pesticides which raises agricultural yield. Thus suggesting that provision of enough amount of loan on time to farmers will be helpful for the enhancement of agricultural productivity through enabling them to attain higher production.