EFFECT OF LOANABLE FUNDS ON AGRICULTURAL PRODUCTIVITY IN RWANDA

This research study explored the effect of loanable funds on agricultural productivity in Rwanda, using different data analysis methods in e-views 13. According to Descriptive statistics one can easily notice a big difference between the maximum and minimum, resulting in big standard deviation valuesof AgrGDP (2120.278), inflation , (5.510271) interest rate (1.407805) and loans (20.99763).This shows that, there is high variation between AgrGDP, Inflation, Interest rate and loans variables in Rwanda. Regression analysis showed that the loans is statistically significance since its respective probability is ( p=0.0309) which is less than 5%, at the set significance level while INF (p=0.8089) and Interest Rate (p=0.5651) are concluded to be statistically insignificant as their probabilities are greater than 5%. The results of the ARDL model, as presented in Table 6.8, revealed short run relationships between agricultural productivity and loanable funds to agriculture. Specifically, a one-unit increase in loanable funds to agriculture is associated with a increase of (0.72) in agricultural productivity. The interest rate, with a coefficient of (-0.31) and a probability of 0.23, exhibits an inverse relationship with agricultural productivity in the short run. Inflation, however, does not have a significant effect on agricultural productivity. There is a distinct vital causality from AGRGDP to LOANS since the probability is 0.5024 which is greater than 5% level of significance, also from LOANS to AGRGDP (probability being 0.1371).The relationship between Agricultural GDP and loans is vital for understanding how financial resources can influence the performance and growth of the agricultural sector. These findings have significant policy implications. To enhance agricultural productivity, policymakers should focus on improving access to loanable funds for farmers, promoting financial literacy, and supporting specialized financial institutions for the agricultural sector. Furthermore, efforts to control inflation and stabilize interest rates will be crucial in creating a conducive environment for agricultural growth. Finally, targeted investments in agricultural infrastructure, technology adoption, and market access are essential to maximize the impact of credit on agricultural output and rural economic development. This evidence-based approach can guide strategic policy interventions that will boost Rwanda’s agricultural productivity, contribute to national economic growth, and support sustainable poverty reduction.