An assessment of agricultural value chain financing amongst smallholder famers in Zimbabwe: A case of Manicaland province

Abstract

Agricultural sector is a key pillar of the Zimbabwe’s economy. The land reform program resulted in 73% of agricultural land falling under small holder farmers. Access to finance by smallholder farmers has been hindering their development and growth. The Ministry of Finance and Economic Development in 2016 under the National Financial Inclusion Strategy adopted Agricultural Value Chain Finance(AVCF) to enhance access to finance for small holder producers. Main objective of the study was to assess AVCF among small holder farmers in Zimbabwe. Supporting objectives were to identify the nature of AVCF among smallholder farmers; to identify factors affecting AVCF among smallholder farmers and to identify the benefits of AVCF among smallholder farmers. A positivism research paradigm was adopted for the study. A case study research design was used. Cluster sampling and convenience sampling were used. Primary data was gathered from small holder farmers in Manicaland Province through a questionnaire. The study revealed that the farmers at most produce crops on 2 hectares of land. The cost of production is at most US$2,000 per hectare and theirgross margin profit ranges between 11-40%. Most of their produce is sold to agro-processors. The farmers mostly rely on self-funding due to stringent lending conditions. Through factor analysis it was observed that AVCF is affected by: farming land size, agricultural finance, favourability of climate, agricultural infrastructure and level of farming skills.AVCF contribute to economic growth; poverty reduction, employment creation, source of raw materials for industry and source of nutrition.It was concluded that AVCF is significant to small holder farmers in Zimbabwe. The study recommendedpolicy makers to put in place sound policies that support smallholder farmers so that they improve their productivity and contribute positively to economy growth likerevision of legislation, such as land and ownership rights and enhance on policy dialogue. There is also a need to develop agricultural and finance policies that are complementary and address agriculture finance from a whole valuechain perspective. Financial institutions need to adopt AVCF and design innovative financial solutions to support smallholder farmers.Further researches should be conducted to assessAVCFfor livestock production as well as broader researches taking into consideration other factors that were not studied under this research.