From risk to resilience: how insurance-linked agricultural credit policy and digital inclusion unlock smallholder farmers' access to credit

Purpose This study examines how crop insurance mitigates financial risk in accessing formal agricultural credit and how digital inclusion policies reduce transaction costs associated with borrowing. Design/methodology/approach Using farm-level survey data, the analysis investigates both credit participation and the amount of institutional credit accessed, distinguishing demand-side and supply-side constraints. Heckman's two-stage selection model is employed to account for potential sample selection and heterogeneity among borrowers. Findings The findings indicate that crop insurance plays a significant role in improving creditworthiness and willingness to engage with formal lending institutions. Insured farmers are also likely to obtain higher loan amounts compared to non-insured counterparts, reflecting reduced default risk perception by lenders. In parallel, digital inclusion measured through access to smartphones and banking services significantly lowers transaction costs related to credit application, documentation and loan disbursement. These findings suggest that both insurance mechanisms and digital tools enhance farmers' creditworthiness and lender confidence, thereby improving access to and uptake of formal credit. Research limitations/implications The study underscores the complementary role of risk mitigation and cost-reduction policies in strengthening agricultural credit. Crop insurance primarily addresses the financial risk, while digital inclusion improves procedural efficiency and access. The study highlights the importance of integrating crop insurance coverage with digital financial infrastructure to promote inclusive and resilient agricultural finance. The study is based on cross-sectional data from a specific geographic context, which may limit generalizability. Future research could explore longitudinal impacts or replicate the study in different agro-economic settings to validate the findings. Originality/value This research provides empirical evidence on the synergistic role of crop insurance and digital inclusion in improving access to agricultural finance. It contributes to the growing discourse on integrated financial services for smallholders and offers important intervention policy insights for enhancing rural credit delivery systems.