The welfare impact of smallholder farmers’ agricultural credit guarantee scheme in Shinyanga and Iringa regions, Tanzania

Abstract

The study examines the impact of smallholder farmers’ agricultural credit guarantee scheme (SCGS) on household welfare, proxied by per capita consumption expenditure and asset index in the Shinyanga and Iringa regions, Tanzania. The study used inverse probability-weighted regression adjustment (IPWRA), a doubly robust technique, on cross-sectional survey data from 500 randomly selected smallholder rice farmers. To ensure the robustness of the results, the study also applied propensity score matching (PSM) using different matching algorithms and conducted sensitivity analysis using the Rosenbaum bounds test. The findings confirmed that participation in the SCGS has a significant impact on household welfare. Results revealed that factors such as household size, education, extension service, frequency of extension contact, membership in farm-based group, land ownership, and farm size positively determined participation in the SCGS. Conversely, off-farm income and savings from the previous season negatively influence SCGS participation. Moreover, the results indicate that participants have a higher asset index of about 38–46% and approximately 54–60% higher consumption expenditure than non-participants. The study findings are consistent across all PSM matching algorithms and the IPWRA technique. Improving smallholder farmers’ access to credit plays a significant role in production and consumption smoothing, ultimately contributing to household welfare, poverty reduction, and the economic resilience of smallholder farmers. Government and other stakeholders should consider scaling up SCGS, design targeted programs within SCGS that focus on vulnerable groups, and ensure efficient credit utilisation to maximise welfare gains.