Impact of smallholder farmers’ agricultural credit guarantee scheme on rice productivity in Shinyanga and Iringa regions, Tanzania

Rice is the staple food crop, ranked second after maize in Tanzania. However, despite its significance as both a staple and cash crop, rice productivity in the country remains low, averaging 2.2t/ha compared to the global average of 4.5t/ha. This productivity gap is mainly due to low adoption of agricultural technologies, attributed to limited access to credit. To address these challenges, the government, in collaboration with development partners, implemented the Smallholder Farmers Agricultural Credit Guarantee Scheme (SCGS) by providing guarantees to encourage selected financial institutions to extend credit to smallholder farmers. This study applied an endogenous switching regression (ESR) and propensity score matching (PSM) techniques to analyse the impact of SCGS on rice productivity using survey data collected in 2024 from 500 randomly selected smallholder rice farmers in Iringa and Shinyanga regions of Tanzania. The findings indicate that gender, land ownership, farm size, savings, improved seeds and fertilisers significantly influence rice productivity. The estimated ATT indicates that participants experience approximately 25% higher productivity than non-participants. In the counterfactual scenario, smallholder farmers who participated would have produced 8% less than if they had not participated in the SCGS. Moreover, smallholder farmers who did not participate would have produced 5% more if they had participated. This study concludes that, while both groups may benefit from the SCGS, the smallholder rice farmers who participated benefit the most from participation. Therefore, the study underlines the significant positive impact of SCGS on rice productivity and recommends designing well-targeted credit interventions to enhance agricultural performance.