Does Financial Credit Obtained From Financial Institutions Influence Agricultural Productivity While Balancing Economic Growth and Sustainability? Empirical Evidence From Sierra Leone Using the VAR Approach

Agriculture dominates Sierra Leone’s economy, employing 75% of the labor force and contributing 64.5% of GDP. Despite its centrality, financial constraints persistently impede sectoral growth, necessitating evidence-based interventions. This study examines the long- and short-term impacts of financial credit on agricultural productivity in Sierra Leone (1990–2024), with implications for policy design. Using time-series data and a vector autoregression (VAR) framework, we analyze linkages between agricultural productivity and financial credit, labor, land, fertilizer use, investment, and rainfall. Co-integration tests and error correction modeling (ECM) identify equilibrium relationships and dynamic adjustments. Co-integration confirms a stable long-run equilibrium. A 1% increase in financial credit, agricultural land, and investment boosts productivity by 0.105%, 0.344%, and 0.04%, respectively. Conversely, a 1% rise in agricultural labor and rainfall reduces productivity by 0.77% and 1.59%, signaling labor saturation and climate vulnerabilities. Short-term ECM estimates reveal a 33.4% annual adjustment toward equilibrium, highlighting sluggish sectoral adaptation. Financial credit expansion, land optimization, and targeted investment are pivotal for enhancing productivity, whereas labor oversupply and erratic rainfall impede growth. Policy priorities include improving smallholder credit access, promoting sustainable land management, and upgrading climate-resilient infrastructure. These findings advance scholarly debates on agricultural finance in fragile economies and offer actionable pathways for Sierra Leone’s agricultural transformation.