Full Length Research Paper

An application of probit analysis to factors affecting small-scale farmers’ decision to take credit: a case study of the Greater Letaba Local Municipality in South Africa

T. O. Sebopetji¹* and A. Belete²

¹Department of Land Affairs, South Africa.

²Department of Agricultural Economics, University of Limpopo, South Africa.

*Corresponding author. E-mail: tosebopetji@dla.gov.za .

Accepted 23 June, 2009

   Abstract

Based on primary data collected in the Greater Letaba Local Municipality from 73 small-scale farmers in the 2006 season, this study used the probit modelling approach to analyse the influence household characteristics have on farmers’ decision to use credit. The model predicted 84.93 per cent of the sample correctly. The results revealed that farming experience, gender and marital status have positive significant effect on farmers’ decision to use credit. In contrast, farmers’ age, education level and membership to farmers’ association had negative significant effect. The study recommends training on the benefits of farm credit among both borrowers and non-borrowers in rural areas. Most borrowers as male-headed and this imply that targeting female-headed households will most likely improve their likelihood of taking credit. It is recommended that the full rollout of Micro Agricultural Finance Institutions of South Africa (MAFISA) and the imminent implementation of the Communal Land Rights Act (CLARA) will ease the collateral problems of these categories of farmers.

Key words: Small-scale farmers, decision, credit, probit analysis.