An analysis of factors affecting access to credit in Lesotho's smallholder agricultural sector

Abstract

The agricultural sector in Lesotho is underperforming mainly due to the inability of smallholders to move from traditional agriculture to a more scientific and technology-based one. Among the challenges inhibiting the ability of smallholders to make the step up is access to financial services, especially credit. The purpose of this study was to examine the factors that may influence the ability of smallholders to access finance by making use of a logistic regression model within the principle component regression framework. The results revealed that the ability of smallholders to access finance, and the potential to make the transition towards a more scientific and technology-based agriculture sector, is influenced by the level of farm and non-farm income, remittances and pension, farm size, availability of family labour, land ownership, savings and repayment ability. The results present important information in terms of guiding institutional arrangements needed to improve credit availability in Lesotho.