Determinants of demand for credit by smallholder farmers': a farm level analysis based on survey in Sindh, Pakistan

TLDR

Formal credit plays a dominant role in developing countries by increasing farmers’ purchasing power for inputs and technology, thereby boosting crop productivity. This study investigates how socioeconomic characteristics of smallholder farmers in Sindh, Pakistan, influence their demand for formal credit, a first of its kind. A cross‑sectional survey of 90 farmers in Thatta district was analyzed using descriptive statistics, correlation, and OLS regression to identify key determinants of credit demand. Formal education, farming experience, land size, road access, and extension contacts were found to significantly and positively drive demand for formal credit, underscoring their importance for agricultural productivity.

Abstract

Purpose In the developing countries, formal credit has dominant role for the development of agriculture sector. It increases the farmer's purchasing power for better farm inputs and agricultural technology for high crop productivity. The main purpose of this study is to examine the influence of socioeconomic characteristics of smallholder farmers for credit demand in Sindh, Pakistan. Design/methodology/approach A cross-sectional data set randomly collected from 90 smallholder farmers in Thatta district, Sindh, Pakistan, is examined. Descriptive statistics, correlation and the OLS regression method were used to demonstrate the important factors affecting the demand for formal credit. Findings The results revealed that formal education, experience of farming, landholding size, road access and extension contacts positively and significantly influenced the demand for formal credit. Originality/value This study is the first, to the best of authors' knowledge, to demonstrate the influence of various socioeconomic characteristics of smallholder farmers on demand for formal credit in Sindh, Pakistan. It also illustrates the imperative contribution to the literature regarding credit access and demand to improve the agricultural productivity.