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Determinants of choice of credit sources by Eswatini SMEs: A focus on the Agriculture Sector

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  • Dlamini, T.
  • Mohammed, M.

Abstract

The purpose of this study is to identify the factors that influence choice of credit sources by SMEs in the agriculture sector. Understanding factors that determine farmers� choice of credit will help improve and prioritise financial services most frequently used by the SMEs, in order to improve local food production and contribute to the Gross Domestic Production (GDP). The study used FinScope 2016 Survey data entailing 3,024 Eswatini SMEs selected through the two stage stratified random sampling method. Out of these SMEs, 87 of them in the agriculture sector were able to access credit from the informal, semi-formal and formal service providers in 2016, hence this study focuses of them. The data was analysed using a multinomial logistic regression. The study finds that keeping financial records, capital size required to start a business, the size of business, age of the business owner, and interest rates are significant factors that influence choices of agriculture SME owners between informal, semi-formal, and formal credit providers. Entrepreneurs that do not keep records are more likely to use informal sources of credit. Therefore, there is a need to develop policies that should thrust interventions to informal sources of finance/credit such as stokvels and rotating and savings schemes (ROSCAs) and also a policy that will ensure that semi-formal financial institutions do not morph into pseudo formal institutions, that is, commercial banks.

Suggested Citation

  • Dlamini, T. & Mohammed, M., 2018. "Determinants of choice of credit sources by Eswatini SMEs: A focus on the Agriculture Sector," 2018 Annual Conference, September 25-27, Cape Town, South Africa 284776, Agricultural Economics Association of South Africa (AEASA).
  • Handle: RePEc:ags:aeas18:284776
    DOI: 10.22004/ag.econ.284776
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    Cited by:

    1. Phiri, Isaac, 2020. "The effect of access to finance on commercialisation of smallholder maize farmers in Eswatini," Research Theses 334755, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Mago, Stephen & Sewela Modiba, Florah, 2022. "Does informal finance matter for micro and small businesses in Africa?," Small Business International Review, Asociación Española de Contabilidad y Administración de Empresas - AECA, vol. 6(1), pages 415-415, March.

    More about this item

    Keywords

    Agriculture; access to finance; SMMEs; SMEs; credit choices; Eswatini JEL codes: Q140; Q180; R200;
    All these keywords.

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