Impact of Credit Access on Household Poverty: A Case of Smallholder Farmers in Malawi

This study evaluates the impact that access to credit has on welfare of smallholder farmers in Malawi in order to address the gap left in previous studies concerning smallholder farmer’s access to credit. The study employed data from Malawi’s Integrated Household Survey 2019/2020 and used the Heckman Selection model to examine the impact of credit access on welfare of smallholder farmers in Malawi. It employed the Heckman Selection Model, which was deemed applicable since the selection to participate in credit programmes is typically non-random. Natural log of daily households’ consumption from the 2020 poverty report data by the National Statistics Office was used as a proxy for household welfare. The results of the study indicate that financial institutions, residential area, employment, distance to town and social cash transfers received per household of every smallholder farmers had an impact on the selection into the credit Programme. It also established that household size, household head education and household head sex contribute to the state of household welfare poverty. In light of this, the study recommends that policymakers expedite the operationalization of credit programmes with the intent to increase participation by improving policies such as the agricultural credit Policy and Action Plans. There should also be an increase in adult literacy programmes and development of credit institutions that target smallholder farmers in general.