Choice of Agri-credit Source Among Cavendish Banana Farmers: Evidence from Southern Philippines

The Cavendish banana industry presents various opportunities for the Philippine agricultural sector; however, the threats of high development, production, maintenance costs, and the persisting Fusarium Wilt issue impede farmers from harnessing these opportunities. With the high production cost, agricultural credit becomes the fastest solution to sustain production. This study examines the factors affecting the choice of agri-credit source of smallholder Cavendish banana farmers in the Philippines. Using a multinomial regression model, survey data from 187 Cavendish banana farmers in Davao del Norte, Philippines, were analyzed to determine the factors influencing the choice of credit source. The credit sources were classified as categorical variables with ‘no credit’ as the base outcome. Results showed that factors such as education, contract arrangement, and level of barangay infrastructure significantly affected the choice of credit source of the farmers. Key findings also show that farmers who loaned from formal sources had higher output and farm incomes than those who had no credit and those who loaned from informal credit. The results can potentially aid the government in crafting policies and interventions relating to improved access to formal credit. Very few studies have explored the credit choice of farmers in the context of an important export commodity such as the Cavendish banana industry. As such, this study can add to the body of knowledge on agricultural finance, especially in the context of an export industry.