Farmers’ Choices of Financial Services for Drip Irrigation System in Southern Mozambique

In this paper, we study the farmers' choices of financial services for drip irrigation systems in Southern Mozambique using survey data collected from 150 household farmers, involving 3 main irrigation schemes in Maputo, Gaza, and Inhambane. The statistical results show the significance of the outlined factors in the performance of small household farmers' adoption of financing options for irrigation. We find that farmers are more likely to adopt financial services for drip irrigation under subsidized interest rates and low irrigation costs. Farmers with lower incomes are less likely to adopt financial services compared to others. Additionally, the main gaps between the supply and demand of irrigation-based financial services can be explained by the farmers’ inability to meet the funding requirements. The solution lies thus in improving the quality of both demand and supply on its critical dimension, which also implies an increase in the economic activity of financing institutions and small farmers. Our study provides useful policy implications for designing efficient financing programs to enhance farmers’ accessibility to funds. Thus, implementing special public policies to minimize financial gaps among small household farmers can play a potential role in driving the household farmers sub-sector, and public incentives are crucial in ensuring sustainable irrigation programs aimed at low-income farmers. The study also suggests the creation of funding institutions aimed at irrigation, which can expand the range of financing mechanisms and take diverse financial services to low-income farmers in rural areas, such as savings, subsidies, vouchers and other types of credit.