Determinants of microcredit utilisation patterns among smallholder farmers in Tanzania: empirical evidence from Morogoro region

Abstract

This study examines the determinants of microcredit utilisation among smallholder farmers in the Morogoro region of Tanzania, where challenges in accessing and effectively using microcredit limit agricultural productivity and household livelihoods. Using a mixed-methods approach with cross-sectional data from 240 smallholder farmers, the study explores socio-economic and institutional factors that influence microcredit use. Results show that microcredit utilisation is influenced by sex of smallholder farmers, education, household size, loan amount, farm size, decision-making authority, income diversification and asset ownership, while microcredit fungibility, inadequate loan sizes and limited financial literacy undermine optimal use. These findings highlight that microcredit alone is insufficient; complementary interventions such as financial literacy programmes, customised loan products and stronger institutional support are essential. Strengthening these mechanisms can improve microcredit effectiveness, enhance agricultural productivity and support rural development.