ACCESS TO CREDIT, AGENT BANKING AND AGRICULTURAL PRODUCTION OF SMALLHOLDERS MAIZE FARMERS IN RURAL AREA IN RWANDA A CASE STUDY OF IMPABARUTA COOPERATIVE

Abstract

The purpose of this study was to examine the effect of access to credit on agricultural Production of smallholder maize farmers in rural area in Rwanda and the contribution of agent banking in the process. The study was carried out in Impabaruta as case study. The study was supported by the Rural Financial Intermediation Theory, the financial inclusion theory, the agricultural-based Economic Development Theory, the Structural Change Theory, and the Financial Sustainability Model. Using a descriptive research design, the study assessed a population of 524 members within Impabaruta Cooperative. The researcher employed random sampling, selecting 158 farmers for data collection through closed-ended questionnaires. Data analysis utilized SPSS version 27, encompassing descriptive statistics, correlation analysis, and multiple regression. The multiple regression between access to credit and agricultural production in I-COOP proved that access to credit (measured in terms of Availability, Affordability, Legal and regulatory framework) contributes 52.6% on agricultural production in I-COOP. Further, the analysis of variance was used to examine whether the regression model was a good fit for the data. The F-calculated was 57.955 and the p-value was 0.002, which was less than the significance level (0.05). The model summary 2 revealed that agent banking contributes 68.9% on agricultural production in I-COOP. Further, an F-statistics of 19.614 which was established as the ratio of Mean Square Regression to the Mean Square Residual, further showed that the model of the study was significant as evident by the significance level of 0.001 < 0.05, demonstrating that agent banking had significant effect in agricultural production in I-COOP. The interaction between access to credit and agent banking was significant, β=0.217, p=0.009, this is evidenced by a significant value which was less than .05. The findings therefore revealed that a joint unit increase in the interaction between agent banking and access to credit increases agricultural production levels by 0.217 units. On the basis of findings, the study concluded that there were significant and positive effects between access to credit and agricultural production, that there was significant effect of agent banking on agricultural production, and that agent banking moderates the relationship between access to credit and agricultural production in I-COOP. Therefore, all hypotheses were accepted at 5% level of significance. The study recommends that I-COOP ensure that their members increase their employees in order to contribute on the unemployment rate reduction and improve their effect on the community.