Sources and Effects of Rural Credit Systems on Smallholder Farming Systems in Botswana.

Abstract

To facilitate economic growth in the rural areas the Govemment of Botswana has, over  the past few years, been giving financial assistance to smallholder farmers in Botswana. Nevertheless, there are clear indications that the problems and issues that led to the establishment of such financial assistance schemes are still prevalent. These include high poverty level and low agricultural productivity. To overcome the financial constraints to a greater extent, the smallholder farmers have resorted to credit.  The primary concem of this study was to examine the sources of credit, its effects on  farm incomes and its relative importance in the rural areas of Botswana. The data used, come from a farm management survey of 60 randomly selected households conducted  in 1993/94 agricultural year. We concluded that credit is popular and is in a high demand in the area. Most average households’ credit came through non-institutional  (informal) sources. The amount of credit received accounted for 67% of total estimated  amount of money required by the farmers at the beginning of the farming season.  Farmers used credit mainly to hire farm labour. Farm incomes were higher among  credit recipient households (P<0.05). These findings have important implications for agricultural and rural development in  Botswana. They suggest the need for designing appropriate rural credit policies. Such policies should ensure an easy accessibility by most smallholder farmers to existing  formal credit institutions in the country. Also, they show that agricultural finance can influence growth in farm productivity.