FACTORS AFFECTING SMALL SCALE VEGETABLE FARMERS ACCESS TO CREDITS AT ETUNDA IRRIGATION PROJECT IN NORTHERN NAMIBIA.

SELMA N. INGULA
26 OCTOBER 2012

Factors affecting small scale vegetable farmers access to credits at Etunda irrigation project in Northern Namibia.

BY:

Selma N. Ingula

Project report submitted to the University of Namibia, Faculty of Agriculture and Natural Resources, Department of Agricultural Economics in partial fulfilment of the requirements for the Diploma in Agriculture.

Project Assessment Board

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|Supervisor (s): | |
|MR. B. THOMAS & | |
|MS. B. MUDAMBURI | |

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UNIVERSITY OF NAMIBIA, DEPARTMENT OF AGRICULTURAL ECONOMICS AND EXTENSION, UNAM OGONGO CAMPUS

Receipt Confirmation Signatures

|Chairperson:……………………… | |
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|Supervisor:……………………….. | |

Disclaimer

This document describes work undertaken as part of a programme of study at the University of Namibia, Faculty of Agriculture and Natural Resources. All views and opinions expressed therein remain the sole responsibility of the author, and do not necessarily represent those of the institute.

Abstract

In Namibia, among other things, lack of finance is one of the fundamental problems hampering crop production. Since access to institutional finance is very limited, the majority of the poor are forced to search financial services through informal channels. The study was sought to ascertain factors that affect small scale vegetable farmer’s access to credits. The study aimed at providing useful information to aid the decision making process for the enhancement of access to credit by the majority small-scale vegetable producers. The overall objective of the study is to identify factors that affect small scale vegetable farmer’s access to credits, and access credit schemes available for small scale farmers from financial institutions in the Northern Namibia. Data were collected using a linear systematic sampling and random sampling methods to select individual farmers for an interview. A total number of 50 households were conducted for interviews were by most of the household conducted 56% were female headed household and 44% were male headed household. A semi structured questionnaire was used as a tool to collect information. The main questions of the questionnaire included the following topics farm (field) size, type of irrigation used, the access to seeds and fertilizers, access to formal and informal savings, price determination of the products, purpose of the loan and the type and how they feel about paying back the money. Finally, all the farmers interviewed had access to credits.

Acknowledgements

First and foremost let me praise and honor the almighty God for the opportunity and capacity given to me to realize my aspiration.

Secondly, I am greatly indebted to my major supervisor Mr. Benisiu Thomas and co-supervisor Ms Bertha Mudamburi for their unreserved help, advice, directing, insight guidance, critical review of my thesis manuscript, invaluable support and suggestions as without their professional help it was difficult to be successful in my academic, research work and thesis write up.

Thirdly, my sincere appreciation and thanks also goes to my grandmother Hilma Ikukutu, my mother Sofia Shikangala, my cousins Johannes Kapiye and Tomas Kapiye for their additional financial support and the whole courage I got from them. My friends Ruusa Ithete, Diina Ndakeva, Wilhelmina Sebron, Simon Negumbo and Selma Salmon, I also thank them for their advice and support during my research. In the same spirit I would like to acknowledge the help received from the extension workers and small scale vegetable farmers in the study area who supplied the relevant information sacrificing their valuable time, deserve special thanks for their unforgettable cooperation during data collection.

Finally, I would sincerely acknowledge the financial support provided by the University of Namibia that made it possible for me to conduct this study. The support hugely contributed to the successful completion of the study.

Table of Contents Page
Abstract v
List of figures viii
List of tables ix
Abbreviations vi
CHAPTER 1: INTRODUCTION 1 1.1.1 Vegetable production in Namibia 2 1.1.2 Problems affecting vegetable Production in Namibia 3 1.2 PROBLEM DEFINITION 5 1.3 JUSTIFICATION OF THE STUDY 5 1.4 RESEARCH OBJECTIVES 6 1.5 RESEARCH QUESTIONS 6 1.6 ORGANISATION OF THE STUDY 6
CHAPTER 2: LITERATURE REVIEW 7 2.1 INTRODUCTION 7 2.2 Credit accessibility in developing countries 7 2.3 Examples of access to credit in African countries: A case of Ethiopia and South Africa. 9 2.3.1 Ethiopia 9 2.3.2 South Africa 10 2.4 CONCLUSIONS 12
CHAPTER 3: METHODOLOGY 13 3.1 INTRODUCTION 13 3.2 STUDY AREA 13 3.3 DATA USED 14 3.4 METHODOLOGICAL OVERVIEW 14 3.5 SAMPLING SCHEME 15 3.6 DATA COLLECTION 15 3.6.1 Primary data 15 3.6.2 Secondary data 15 3.7 DATA ANALYSIS 15 3.8 CONCLUSIONS 16
CHAPTER 4: RESULTS AND DISCUSSION 17 4.1 INTRODUCTIONS 17
CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 24 5.1 SUMMARY OF CONCLUSION 24 5.2 RECOMMENDATIONS 26
REFERENCES 27
APPENDICES 31

List of figures Page

Figure 1: Shows a map of Namibia, showing part of the Omusati region where etunda irrigation project is found. 13
Figure 2: Shows the number of respondents that have access to credits, both formal and informal 20
Figure 3: Shows the influence of water on production 21
Figure 4: It shows sex as a limiting factor to credit accessibility 22
Figure 5: Shows how age has an effect on credit accessibility 22
Figure 6: Shows the effect of the level of education on credit accessibility 23

List of tables Page

Table 1: Summary of Demographic Characteristics of Respondents. 17
Table 2: The table shows the education level completed by respondent 18
Table 3: The table is showing the production purposes of the respondents 18

Abbreviations

AGRIBANK Agribank of Namibia
GDP Gross Domestic Product
GRN Government of Namibia
MAWF Ministry of Agriculture, Water and Forestry
MEATCO Meat Corporation of Namibia
MFI’s Microfinance Institutions
N$ Namibian Dollar
NAB Namibian Agronomic Board
NBE National bank of Ethiopia
NDC Namibian Development Corporation
NDP National Development Plan
RSA Republic of South Africa
SME Small Medium Enterprises
UNAM University of Namibia

CHAPTER 1: INTRODUCTION
1.1 Background to the Study

Namibia is endowed with some rich natural resources such as diamonds, mining, fisheries and outstanding tourist attractions. This has led to a relatively high per-capita income that classifies Namibia as a low middle-income country. According to Odada and Godana, (2002), agriculture remains the main source of employment for the majority of the Namibian population with an estimated of 70 percent of the population, mostly women, dependent to a greater extent on it for their livelihoods. The agricultural sector accounted for 5.9 per cent of Gross Domestic Product (GDP) in 2007, almost equally shared among livestock farming, crop farming and forestry (GRN, Green Scheme, 2008). Agricultural exports consist mainly of livestock and meat products making up approximately 15% of total merchandise exports.

The main constraints to agricultural development are the very dry land and semi-arid climate and the scarcity of arable land which is suitable for irrigated agriculture. Lack of water for irrigation is a major constraint to the expansion of horticultural production in Namibia as well. The sector is characterized by low crop yields due to poor resources and high risk of farming environment. The sector is further constrained by high cost of inputs, lack of access to credit and risks related to drought or flood, inadequate government extension officials and inadequate transport facilities for field extension officials coupled with the long distances to reach farmers in sparsely populated areas (Proctor, 2007).

In order to improve food production, the Government of Namibia has engaged on the Green Scheme policy, which was adopted in 2002 but formally approved in August 2003 to enhance high value crops production. The scheme is aimed at developing an irrigation based agronomic production system with a view of increasing the contribution of the sector to GDP. Currently, various projects are successfully running in this regard; include Ndonga Linena and Shadikongoro in the Kavango region, Etunda irrigation project in the Omusati region and the Orange River irrigation project in the Karas region (GRN, MAWF, 2010). Etunda Irrigation Scheme being one of the projects under the scheme; is based in the Northern part of Namibia growing mainly vegetables. According to Namibian Agronomic Board, 2008a, demand for vegetable produce exceeds the local production in Namibia.
It has also stated that local producers supply only 10% of the vegetable demand. Namibians consume an estimated of 90 thousand tons (N$200 million) of fresh produce per year, of which 80 percent is imported from South Africa (GRN, NAB, 2008a).

Fresh fruit and vegetable production faces constraints even on large scale farms because of limited water availability and government’s water use policy which restricts the hectares of land that can be irrigated by an individual farmer to about one hectare unless a permit to irrigate more land has been obtained (Proctor, 2007). The ministry controls ground and surface water resources and allocates licenses for water extraction and borehole construction. Water extraction by farmers along the dam and canal is as yet unregulated (WERNER, 2009: 29). This implies that even many large scale farms are constrained with respect to production capacity and hence are forced to pool production volumes. High transaction costs (cost of transportation of produce from production to consumption areas) and cold chain requirements may discourage farmers from participating in the supermarket supply chain (MANICA, 2010).

1.1.1 Vegetable production in Namibia

The smallholder horticulture sector is relatively underdeveloped with few farmers specializing in fruit or vegetable production. The sector is fragmented, comprising of small scale farmers. This tends to deny the growers the potential of economies of scale, including the possibility of dealing with market fluctuations and post harvest and transportation costs (NDP 2, 2001/2002-2005/2006).

It is generally agreed within the private and public sectors of Namibia that, a large amount of the country’s demand for horticultural produce could be satisfied by domestic production, which accounts only 3% of the vegetable demand in the formal sector (NAB 2009/2010: 23). Although Namibia has the potential for producing a large proportion of its horticultural needs, the bulk of the supply of its vegetables still comes from the Republic of South Africa (RSA). However, the Government of the Republic of Namibia (GRN) sees significant potential for production of vegetable produce through irrigation farming in northern communal areas, home to almost half of the Namibian population and it is where most of the water sources are available.

According to Evans and Hopley (1992), the bulk of the demand for vegetables in Namibia has traditionally been satisfied by imports from RSA, where plentiful supply of wide range vegetables at reasonable prices is available almost all year round. Hopley contends that South African farmers have for many years enjoyed an unfair advantage over Namibian producers because of ready access to technology and inexpensive inputs.

Due to limited capital for vegetable production, they tend to use cheaper open pollinated varieties that are not always disease resistant or adapted to warmer conditions. They also use limited quantities of fertilizers and agro-chemicals and therefore their overall productivity is limited (Evans and Hopley, 1992). Most Namibians relied on family labour and used simple implements such as hoes for weeding which is relatively cheaper.

The main vegetable crops produced all year round in Namibia include tomatoes, potatoes, cabbage and onions mostly by the commercial farmers. Other products include butternut squash, pumpkins, gem squash, green peppers, sweet corn, sweet potatoes, beetroot, spinach, cucumber and green lettuce (NAB, 2009/2010: 23). Some farmers regard vegetable production as a secondary activity coming towards the end of the rain season and producing crops for home consumption with a surplus for sale.

1.1.2 Problems affecting vegetable Production in Namibia Agriculture in Namibia, like in many other developing countries is faced with a number of constraints that hamper the growth and development of the sector. Some of these problems include the following:

i. Unfavourable weather conditions: Namibia is characterized by endemic drought, high temperatures which hinder the growth of certain vegetable types especially during the summer months. Climate variations, chiefly in the form of droughts and to a lesser degree floods, have a major impact on agriculture (Christelis and Struckmeier, 2001). With this type of climate, production is seasonal and therefore very difficult to produce vegetable crops throughout the year. This leads to supermarkets terminating contracts with producers because they cannot find reliable farmers to supply them with vegetable produce throughout the year (MoA, 2007/08).

ii. Lack of water for irrigation: The availability of water becomes the primary constraint for agricultural development in Namibia. Due to low rainfalls surface water is generally scarce except on the Northern borders of the country, where there are perennial rivers (Kunene, Kavango and Zambezi) and the (Orange River) in the Southern borders and with few dams around (like the Hardap and Olushandja). Most farmers have to rely on underground water for irrigation and where surface water is abundant; the soils may not be suitable for irrigation.

iii. Lack of access to credit and investment schemes: Lack of access to credit is a problem compounded by unfavourable credit conditions (requires security, fixed, and moveable assets, title to land) that are impossible to be met by most of the communal residents. It is estimated that 75 percent of communal farmers would require seasonal, medium, or long-term credit. Most vegetable inputs are difficult to obtain and expensive; i.e. pesticides, material for irrigation, specific vegetable machines and tools and fertilizers, which are in short supply locally. An insufficient supply of these vegetable resources and services raises the price and risk of production considerably, e.g. this risk is especially high with water pumps. If they (pump) break down for long periods of time, the whole crop can be lost. This can endanger the livelihood of farmers who are short of capital (Proctor, 2007).

iv. Transport and Poor storage infrastructure: The difficult situation of transport does not only hamper the access to affordable farming inputs, but also poses a major constraint for linking supply and demand with regard to the vegetable produce market. Some vegetable produce are perishable products and have a limited shelf life, but there are yet no refrigerated trucks and enough cold storage facilities in Omusati and Kavango. This means there is great pressure on producers in the

Omusati and Kavango region to sell their products as quickly as possible. Profit losses among small scale vegetable farmers resulting from unavailability of storage and refrigeration were estimated at around 12 percent (NDC, 2010b). Transport immediately after harvest is still the best way to minimize losses, but there is little incentive for major transport providers to expand their services to vegetable suppliers in the north. In addition, flow of information between farmers and existing transport providers are insufficient.

1.2 PROBLEM DEFINITION
Etunda irrigation project is relatively underdeveloped with few farmers specializing in vegetable production. Although so, not all the small scale vegetable farmers who apply for the financial assistance with the agency of getting financial help from the financial institutions get the assistance they need, either to start up or expand their vegetable production.

Agriculture as it is in its nature, labour intensive, small scale vegetable farmers rarely use advanced technologies in farming; rather limited technology is used, such as hoes. They tend to slowly adopt from using the traditional methods of production instead of modernized technologies. Most of the new technologies require large amounts of capital to implement thus making farmers reluctant to change their traditional methods of production. Farmers are unable to purchase improved inputs or to expand production which could in turn result in increased income. There are policies set up by the government; involving issuing of grants, others issuing of subsidies and making credit facilities available to farmers to assist small scale farmers financially and also some private financial institutions offer agricultural financing services but not all farmers are able to acquire these offers. Some farmers are not aware of the credits that are offered. Therefore this study will identify the importance of credit accessibility to small scale farmers in Etunda irrigation project.

1.3 JUSTIFICATION OF THE STUDY
The demand for agricultural credit or other financial assistance depends on opportunities to use credit in production activities. Farmers are not able to easily access funding for their agricultural production hence lower outputs of vegetable products in the country. For small scale vegetable farmers to expand their production they need to purchase improved inputs but some inputs require large amounts of capital. The study of factors that affect small scale vegetable farmer’s access to credits in the study area is important in providing information that will enable to take effective measures to policy makers to improve access to credit. Therefore the outcome of the study will try to identify factors limiting farmers to credit accessibility at Etunda irrigation project, to identify how the crop yield is affected by lack of credit accessibility, the type of credits that are available for them (formal and informal) and from which institutions.

1.4 RESEARCH OBJECTIVES
Overall objective:
To identify factors that affect small scale vegetable farmer’s access to credits available for small scale farmers from financial institutions in the Northern Namibia.

Specific objective: 1. To identify the factors limiting small scale vegetable farmers at Etunda irrigation project access to credit. 2. To identify how the crop yield is affected by lack of credit accessibility. 3. To identify the main credit options available for small scale farmers. 4. To recommend policy options and further areas of study with regards to credit facilities for small scale farmers in northern Namibia.
1.5 RESEARCH QUESTIONS
The study aims to address the following questions: 1. What are the factors that affect small scale vegetable farmer’s access to credits at Etunda irrigation project? 2. Why do small scale vegetable farmers need credit accessibility for? 3. What types of credits options are available for small scale vegetable farmers?

1.6 ORGANISATION OF THE STUDY
Chapter two highlights literature review, Chapter three is the methodology used in the study, Chapter four covers results and discussion and finally the conclusion and recommendation that are presented in chapter 5.

CHAPTER 2: LITERATURE REVIEW

2.1 INTRODUCTION

This chapter presents an overview of literature on the credit accessibility constraints to farmers in other locations. According to the free on line dictionary, Encyclopedia (undated), credit means Faith and it comes from the Latin credito. “An agreement, by which something of value-goods, services, or money-is given in exchange for a promise to pay at a later date’’. Credit also mean a transaction between two parties in which one, acting as creditor or lender, supplies the other, the debtor or borrower, with money, goods, services, or securities in return for the promise of future payment (Ellis 1992).

2.2 Credit accessibility in developing countries
There are different types of credit dual in developing countries namely; formal and informal credit systems. In the formal credit, markets institutions provide the difference between depositors and lenders, charged relatively low rates of interest that usually are government subsidized. In informal credit markets money is lent by private individuals, professional moneylenders, traders, commission agents, land lords, friends and relatives (Mohieldin and Write 2000). In particular, formal credit, whenever available, reduces, but not completely eliminates, informal borrowing. Therefore the two forms of credit perform different functions in the household’s inter-temporal transfer of resources (Beth, et al.1999).

With increasing agricultural productivity and farmers’, income is always an important consideration for the government, it is very important to investigate elements affecting farmers’ access to credit in order to improve productivity and increase rural household and farm incomes. With limited access to credit, the budget balance within the year can become a constraint to agricultural production (Banerjee and Duflo, 2009).

According to a research done by Banerjee and Duflo, 2009, many farmers cite a lack of financial capital as a major reason for not adopting valuable technologies in developing countries. Research has also suggested that farmers with less access to credit plant fewer high yielding crop varieties. In many developing countries, and particularly in rural areas, access to financial services, including credit and formal saving mechanisms, is limited. Even where financial services are available, they are often highly disadvantageous to smallholder farmers. For example, within a single market, interest rates often vary according to the characteristics of the borrower and the activity being financed.

Farmers and other small-scale borrowers often face high interest rates and unfavourable borrowing conditions. Lacking formal credit rating mechanisms, lenders often charge high interest rates to help offset the risk that loans will not be repaid. These higher interest rates for risky borrowers can, perversely, have the effect of attracting only borrowers with no intention of repaying, thus driving interest rates even higher, as lenders seek to offset increased risk, and further reducing access to credit for the small-scale farmer (Banerjee and Duflo, 2009).
In addition to the problems that monitor and contract enforcement, many smallholder vegetable farmers have less capital assets that they can use as collateral (perhaps due to poor property rights), (Agricultural Technology Adoption initiative, 2009). As a result, these farmers have limited liability—meaning that they will be bankrupt. Lack of finance may have different effects for different farmers. Women, in some settings, may have more difficulty accessing credit than men. On the other hand, women have been identified by some financial service providers as more responsible borrowers, with higher repayment rates, and other microfinance institutions cater specifically to women, before then can fully repay outstanding loans should an investment not work out, (Agricultural Technology Adoption initiative, 2009).

Women in many occasions are discriminated against in formal credit markets in developing countries (Buvinic and Berger, 1990). The belief in discrimination against women in formal credit markets, is often based upon the limited number of women borrowers in the market, is perceived as an outcome of lenders’ rejection of women’s applications for loan contracts. In addition to the challenges created through the lack of financial services available to small farmers, low financial literacy can pose as another constraint. Further research suggests that a lack of financial does not appear to be as important as the high costs that poor people incur in accessing financial products (Cole and Gine. 2009)

2.3 Examples of access to credit in African countries: A case of Ethiopia and South Africa.
2.3.1 Ethiopia
In Ethiopia, among other things, lack of finance is one of the fundamental problems hampering production, productivity and income of small scale vegetable farm households. Since access to institutional finance is very limited, the majority of the poor are forced to search financial services through informal channels. Farmers need to boost agricultural production and productivity farmers have to use improved agricultural technologies which are too expensive to acquire and small farmers cannot afford to self finance, and this explains why certain farmers prefer to use borrowed credit (Schmidt and Kropp, 1987).
In Ethiopia, the poor have been highly deprived of financial services (NBE 2004). As stated by Wolday (2002), not only the rural poor are excluded from the formal financial system, but also small and medium enterprises (SME) lack access to financial services, due to the fact that formal banks are either unwilling or unable to serve SME. Several microfinance institutions (MFIs) have been established and have been operating towards resolving the credit access problem of the poor particularly those who engage in petty business (Befekadu, 2007).
Commercial banks and other formal institutions fail to cater to the credit needs of smallholders, however, mainly due to their lending terms and conditions. It is generally the rules and regulations of the formal financial institutions that have created the myth that the poor are not bankable, and since they can’t afford the required collateral, they are considered uncreditworthy (Adera, 1995). Despite efforts to overcome the widespread lack of financial services, especially among smallholders and the expansion of credit in the rural areas of this country (Ethiopia), the majority still have only limited access to bank services to support their private initiatives (Braverman and Guasch, 1986).
In addition, formal credit schemes do not typically take gender into account in practice; they tend to be biased towards men. It is the male headed household which is usually approached and registered for the provision of institutional credit (Ellis, 1992). Financing of agricultural inputs and labour wages requires liquid cash that often is not readily available with the smallholder farmers. Therefore, it is essential to expand the status of rural credit at large to improve agricultural productivity.

2.3.2 South Africa
Small-scale vegetable farmers in communal areas of South Africa have limited access to factors of production including credit and information. Despite these problem, some small-scale farmers have managed to produce food for own consumption and for the market (Ortmann & King, 2006). The demand for credit for productive investments usually comes from those poor who are less risk-averse and enables them to overcome liquidity constraints, making it possible to undertake investment that can boost their production, employment and income. A study in South Africa has indicated that the failure of formal banks to cater for poor is due to a combination of high risk, high costs and consequently low returns associated with such business (Okurut et al., 2004).

Spio, (2002) argued that, financial intermediaries have not been able to accommodate small-scale vegetable farmers because it is risky, costly and a difficult task associated with high transaction costs. Lack of information prevented large formal lenders who had capacity to serve the small farmers and the poor from doing so. The methods and practice of most banks in Limpopo Province did not meet the needs of their clients (Spio, 2002).

In the study on the accessibility to credit on small-scale vegetable farmers in Limpopo, Spio (2002) found that the difference in productivity between borrowers and non-borrowers is due to both the use of credit and to the pre-existing inherent characteristics of farmers. Thus, credit can increase the output of randomly selected farmers. In the same study, a socio-economic comparison based on the credit status of small-scale vegetable farmers indicates that borrowers have significantly higher values than non-borrowers, especially in area cultivated, input usage and productivity (Spio, 2002).

Access to affordable credit is one of the most important factors affecting production and therefore income of the poor. The poor access to agrarian and support services are attributed to socio-economic factors of the farmers as well as constraints encountered by these farmers in institutions. Constraints encountered by the financial institutions in serving the small-scale farmers and the poor involve high risk and high transaction costs (Okurut et al, 2004 & Spio, 2002).

Although government has made some advances in widening the access to credit, most small-scale and emerging farmers still do not have access to affordable credit for investment in the technology that is vital in expanding and increasing agricultural production or diversification of production into high value crops (Vink, 2003). The 2005 Development Report also states that black farmers have no access to credit, no access to financial services, and no access to grants other than those available for land reform beneficiaries and the Land Bank which was supposed to be charged with the responsibility of supplying the financial services required to develop the smallholder agriculture, will now concentrate on lending to established commercial farmers (DBSA, 2005).

Farmers with lack of collateral in terms of land and other assets normally access credit through informal lender who normally charges higher interest rates. Larson et al. (1994) argues that borrowers choose informal financial services because of easy access, variable loan size, flexible repayment schedule, personal guarantees, convenience and very short period needed to obtain loan approval. Kgowedi et al. (2002) studied the factors, distinguishing the choice of moneylenders and non-money lender and found that age, level of occupation, and marital status are important determinants for the choice between the financial services of moneylenders and non-moneylenders. The study also found that income influences the choice of a moneylender.

Based on the study that had been conducted in South Africa, it is evident that access to agricultural support services including credit remains the major factor affecting the growth of small-scale agriculture in South Africa, most especially in the former homelands. Furthermore, access to credit coupled with pre-existing inherent characteristics of some credit users increases the productivity of small-scale farmers. Managerial traits such as, better contacts, better education, hence better information, are likely to influence farmers to participate in the markets and also their decision to use credit. It is also evident that financial institutions distance themselves with serving small-scale vegetable farmers due to risk and costs implications associated with serving this category of farmers (Kimemia, 2004).

2.4 CONCLUSIONS
In simple word, credit means an agreement between two people, were one plays the role of a debtor and the other of a creditor. The credit supplies money, goods or services in return or exchange with other goods in the future. There are two types of credit systems; formal and informal credit systems. In formal credit systems, the debtors are charged relatively low rates of interest that usually are subsidies by the government. In informal credit system, money is available to private individuals, professional moneylenders, traders, commission agents, land lords, friends and relatives without interest. Credit is needed by the farmers in order to increase their production activities by using highly improved technologies which require money.

In developing countries, smallholder farmers tend to be disadvantageous when it comes to formal credit system. The agricultural financial institutions charge high interest rates that are not affordable by every farmer and their borrowing conditions are unfavourable as well. In informal credit system, women are discriminated and they face difficulties in credit accessibility due to some collateral that are asked and unable to afford; such as high capital. People with low literacy level in developing countries are also left out in credit accessibility.

In African countries, poor people have no access to formal credits and therefore switch to informal credits which are easy to get with a flexible repayment schedule. Rural people and SME’s are discriminated and lack access to formal financial services. Male have the whole capacity and access to formal credits then women in African countries, but lack of information tend to prevent large formal lenders that have the capacity of providing services to people in need of it. It has also been stated that black farmers have no access to credits at all.

CHAPTER 3: METHODOLOGY

3.1 INTRODUCTION
This chapter is going to introduce all the procedures and instruments that were used and how data were analyzed and interpreted in the study. The chapter starts with the study area, then data used, followed by methodological overview, and then sampling scheme, followed by data collection and the data analysis and finally the conclusion to the chapter.

3.2 STUDY AREA
Etunda irrigation project is an irrigation farm that is approximately 150km west of Oshakati in Omusati region, northern part of Namibia. It was initiated in 1992 by the Namibian government. The region has a warm climate with annual mean temperatures ranging from 26-30 degree Celsius and average rainfall of 270 mm annually. The soil type is Sandy-silt, which is ideal for vegetables cultivation.
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Figure 1: Shows a map of Namibia, showing part of the Omusati region where etunda irrigation project is found.

Source: Ministry of Agriculture, Water and Forestry, 2010

According to the Ministry of Agriculture, Water and Forestry, 2010, the irrigation project is about 1200 hectares and 600 hectares of this farm is under irrigation. The farm 300 hectares is use for large commercial farming operations. The remaining hectares of Agricultural land are used for small scale production. Currently there are 82 small scale farmers, with each allocated 3 hectares of farming unit under irrigation. The small scale farmers who are participant in the project are supported by financially through loans procurement by Agribank of Namibia and subsidized inputs such as water, irrigation infrastructure, farmer houses and tractors by the Ministry of Agriculture, Water and Forestry. Maize is the main crop produced at Etunda irrigation project. Other crops grown during wet or dry season annually include maize, cabbage, tomatoes, onions, butter nuts, ground nuts sweet potatoes and water melons. Figure 1 shows the location of Etunda irrigation project.

3.3 DATA USED
During the interview, a set of questionnaires were used as the main tool in get the information from the farmers (target group).

3.4 METHODOLOGICAL OVERVIEW

3.5 SAMPLING SCHEME
Since there are 82 small scale vegetable farmers at Etunda irrigation project, 50 farmers (61% of total farmers) were selected and interviewed. A linear systematic sampling method was used to select the respondents. This method was used because it is the best sampling method since the houses are in a homogenous way, in a line. After every second house, another house was selected and interviewed. Some houses were also randomly selected, especially the first house and this was just used in some cases during the interview, in order to meet the 61% representative sample size. The information from Agribank was collected by interviewing an expert with a check list of questions.

3.6 DATA COLLECTION
3.6.1 Primary data
With regards to primary data, information was collected via direct face to face with farmers and with the Agribank of Namibia. The study used a quantitative approach in getting the data about the farmers on the availability, accessibility, and use of credits. Advantage of using this method is that, data’s collected are considered meaningful and reliable because there is time to discuss some of the questions with the respondents in a case were the respondent does not understand the question. A semi structured questionnaire (see Appendix 1) was used as the main instrument for data collection. The respondents were requested to answer the questionnaire in the presence of the researcher so that clarifications can be made easily where necessary. However, the method was found to be time consuming as it takes months to conduct all the households and it was also costly to conduct the survey. The interviews were conducted during June- September 2012.

3.6.2 Secondary data
Secondary sources (desk review sources) both published and unpublished such as books, journals, articles and internet sources were used during the study.

3.7 DATA ANALYSIS
Data that had been collected from the respondents were captured into the computer by using Microsoft office excel programme. The method of analysis adopted is descriptive analyzes. The descriptive tools consist of the use of percentages, averages (means) and frequencies and information were presented into tables, graphs and charts.

3.8 CONCLUSIONS
In conclusion to the chapter, 50 farmers (61% of total farmers) were selected and interviewed. A linear systematic sampling method was used to select the respondents. This method was used because it is the best sampling method since the houses are in a homogenous way, in a line. Therefore, after every second house, another house was selected and interviewed. Random sampling method was also used in some cases, to meet the required number (50 respondents).

The primary data were collected via direct face to face from farmers using a structured questionnaire and from the Agribank of Namibia; a check list of questions was used. The study used a quantitative approach in getting the data about the farmers on the availability, accessibility, and use of credits. Data’s collected with quantitative approach are considered to be meaningful and reliable because there is time to discuss some of the questions with the respondents in a case were the respondent does not understand the question. This means that, during data collection, the respondents were requested to answer the questionnaire in the presence of the researcher so that clarifications can be made easily where necessary.

With regard to secondary data’s, published and unpublished sources were used during the study. Data that had been collected from the respondents were captured into the computer by using Microsoft office excel programme. The method of analysis adopted is descriptive analyses. The descriptive tools consist of the use of percentages, averages (means) and frequencies and information were presented into tables, graphs and charts.

CHAPTER 4: RESULTS AND DISCUSSION

4.1 INTRODUCTIONS

This chapter presents and discusses the results of the analysis that has been conducted to address specific objectives of the research. The chapter is divided into four major sections. The first section of this chapter presents the summary of the demographic characteristics of respondents. Access to the main financial supplier institution in the study area is presented in the second section. In the third section, small scale vegetable farmer’s perceptions on credit accessibility of formal financial institution are analysed. The fourth section identifies the most important factors that affect small scale vegetable farmers’ access to formal credit.

1. Demographic Characteristics of Respondents.
Table 1 shows the sex and age of the sample respondents. Accordingly, the biggest person that was interviewed was 69 years and the smallest was 30 years. The result from the table shows that from the total sample respondents about 56 percent of the credit users were females and 44 per cent of the users were males.

Table 1: Summary of Demographic Characteristics of Respondents.

|Variables |Frequency |Percentage% |
|Sex | | |
|Male |22 |44 |
|Female |28 |56 |
|Age (yrs) | | |
|30-49 |27 |54 |
|50-69 |23 |46 |

The study reviled that out of the 50 loan beneficiaries, 56% of them were females, while 44% were male which shows that more females are involved in farming activities and they are credit users at Etunda than the male (Table 1). With regard to sex again, the number of credit user female headed households is higher than the credit users as compared to male. This confirm the notion that females are bread winners of the family and are loaded with responsibility of putting food on the table and providing for the other needs of the family. The study also showed that 27 respondents representing 54% of the loan beneficiaries are between the ages of 30-49 and 23 respondents representing 46% are within the age of 50-69. This means that, the younger you are the better chances of being involved in the vegetable process and again better chances of receiving the loan from the Agribank of Namibia.

Table 2: The table shows the education level completed by respondent

|Variables |Frequency |Percentage% |
|Level Of Education | | |
|None |2 |4 |
|Attended |2 |4 |
|Lower primary |3 |6 |
|Upper primary |9 |18 |
|Junior secondary |15 |30 |
|Secondary school |19 |38 |
|Tertiary education |0 |0 |

Results also showed that, 48 respondents representing 96% of the loan beneficiaries had one form of formal education and the majorities have gone until their secondary education level, which is the highest level of education that had been attended by the small scale vegetable farmers from Etunda that were interviewed. Apart from this, 2 respondents representing 4% had never attended school and have no formal education (Table 2).

Table 3: The table is showing the production purposes of the respondents

|Variables |Frequency |Percentage% |
|Production | | |
|Selling and consumption |29 |58 |
|Selling |21 |42 |

The study also revealed that all the 50 respondents that were interviewed representing 100% of loan beneficiaries were major farmers and there is not engaged in other activities apart from farming. The study also showed those 29 respondent representing 58% that are engaged in the production process, they produce for selling and consumption purposes, while 21 respondent representing 42% produce for selling purposes.

2. Access to formal credits at the Agribank of Namibia- Main financial institution provider
The Agribank of Namibia which specializes in providing financial assistance to the farmers, both small and large scale farmers, the same applies to the small scale vegetable farmers from Etunda irrigation project. The bank has set up an agreement with the small scale vegetable farmers that all the farmers that will be engaged in production under Etunda irrigation scheme, will automatically be awarded a loan, called a production loan which is meant for agricultural production purposes only.
The bank has started with funding the farmers since 2007, which means they have been doing it for 5 years now. The loan that they give to the farmers under the Etunda irrigation scheme is called production loan that can be used for the purchasing of seeds, fertilizers, herbicides and pesticides, weeding, fuel and oil, transportation costs, wages for temporary workers, lease of grazing, licks, veterinary medicine, horticulture and micro-irrigation. Each farmer is provided with N$19 000 per hectare (N$57 000 / 3 hectares), which is repayable in one year and it can be revolved for 5 years with an addition of 4% of interest that has been recently added on. The facility is available to both full and part time farmers. These farmers are not asked any collateral, it is a guarantee from the GRN but they must be harvesters for them to qualify for the loan. Their selection criteria depend on the financial and repayment ability of the client and a good credit record.

3. Access to credits by the farmers at Etunda irrigation project
The figure below shows the number of respondents that have access to credits, both formal and informal.
[pic]

Figure 2: Shows the number of respondents that have access to credits, both formal and informal

This means that all the farmers under the Etunda irrigation scheme have access to formal savings. Once they are given the loan, they have to pay it back of which some farmers finds it very hard to pay the money back. The reasons behind this is that the amount of money that the farmers are required to payback is too much since there is now an addition of 4% interest that has been recently added on. Some farmers feel that the period of time that they are given to repay the loan back is not enough, very less. Lack of marketing also contributes to the difficulties of paying the loan back. Farmers explained that, there is not always market were you can make profit, sometimes they sell and get a loss of which they cannot cover within a year.

The farmers under Etunda irrigation scheme they do not get any financial support from any other financial institutions apart from Agribank. This is because that, other financial institutions asks for collaterals that the farmers are unable to afford or provide. E.g. houses in town of which many of them don’t have. Money is said to be a problem when it comes to production and some farmers explained that they cannot produce without money. Farmers need money to buy farming implements and inputs for production which are expensive to afford.

4. The influence of water on production
The farmers that were interviewed stated that they get water from a canal that receives water from a dam. The problem that is associated with water has a big influence on the production process. The farmers explained that the water level in the dam sometimes drops out and it is their own responsibility to inform Namwater so they pump water in the dam. Another problem is also when the machine that pumps water breaks or the pipes that supply water to their field burst. All of this are very expensive and not easy to afford, and obviously they need money to repair them or buy new once. By the time they are going to get them working, their production has already gone down; the crops will be dead because they have not been irrigated for sometimes. See figure 3.

Figure 3: shows the influence of water on production

[pic]

4.1.5 Factors limiting credit accessibility i. Gender
Gender is significant and has a negative effect on credit accessibility to small scale vegetable farmers. Figure 3 show that female has a high percentage of 56% than male that are having 44%. This shows that women have high and better chances to formal credits than male. It was also stated that women are better respected with money and they tend to pay back the money than males.

Figure 4: It shows sex as a limiting factor to credit accessibility

[pic]

ii. Age
The finding suggests that younger people have a good and better chance to credit accessibility than old people. This is because, young people tend to find it easy to understand the operations, while older people are afraid of loan conditions and would not like to enter into debts obligations. Young people are also better trusted with money by Agribank and tend to pay back the money in time.
[pic]

Figure 5: shows how age has an effect on credit accessibility

iii. Level of education
Access to formal credits improves with increase in level of education and the respondents with a higher level of education benefited more.
[pic]

Figure 6: shows the effect of the level of education on credit accessibility

iv. Repayment amount of money and payback period
The respondents that were interviewed stated that, due to the 4% of interest that has been recently added on, this has increased the amount of money to be pay back. The farmer’s feels that the money is too much to be pay back in a year, and if they don’t pay back the money, the following year they will not be given the loan before they pay back the money that they owe. This means that, if they happen not to pay back the money, their production also stops as well and drops out and contributes to the unemployment level in the country. The loan has to be returned back within a year and this time is very short for some farmers.

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

5.1 SUMMARY OF CONCLUSION
This study was conducted in 2012 from Etunda irrigation project in Omusati region and Agribank of Namibia in Oshana region.The government of Namibia allows interested farmers to take part in Agricultural production, as agriculture is seen by the majority of the Namibian population as the main livelihood source. Various constraints that hamper agricultural development and expansion of horticultural production in Namibia include the very dry land and semi-arid climate, the scarcity of arable land which is suitable for irrigated agriculture and lack of water for irrigation as well. The sector is further characterized by low crop yields due to poor resources and high risk of farming environment, high cost of inputs, lack of access to credit and risks related to drought or flood, inadequate government extension officials and inadequate transport facilities for field extension officials coupled with the long distances to reach farmers in sparsely populated areas.

Farmers at Etunda are each provided with 3 hectares of land and some have 6 hectares (2 plots). The Namibian government has covered the collaterals for farmers, and this allows them to be automatically given loans from Agribank. The loan can be used only for production purposes, which may include buying fertilizers, seeds, pesticides, buying implements to be used in the farm and also to pay for the hired workers.

There are two types of credit systems; formal and informal credit systems. In formal credit systems, the debtors are charged relatively low rates of interest that usually are subsidies by the government. In informal credit system, money is lent by private individuals, professional moneylenders, traders, commission agents, land lords, friends and relatives without interest. Credit is needed by the farmers in order to increase their production activities by using highly improved technologies which require money.

In developing countries, smallholder farmers tend to be disadvantageous when it comes to formal credit system. The agricultural financial institutions charge high interest rates that are not affordable by every farmer and their borrowing conditions are unfavorable as well. In informal credit system, women are discriminated and they face difficulties in credit accessibility due to some collateral that are asked and unable to afford; such as high capital. People with low literacy level in developing countries are also left out in credit accessibility.

In African countries, poor people have no access to formal credits and therefore switch to informal credits which are easy to get with a flexible repayment schedule. Rural people and SME’s are discriminated and lack access to formal financial services. Male have the whole capacity and access to formal credits then women in African countries, but lack of information tend to prevent large formal lenders that have the capacity of providing services to people in need of it. It has also been stated that black farmers have no access to credits at all.

Linear systematic sapling and random sampling method was used to select 50 farmers in Etunda to be conducted. Questionnaires were used as the main tool to collect primary data’s (see appendix 2). The main objective of the study was to identify factors that affect small scale vegetable farmer’s access to credits and access credit schemes available for small scale farmers from financial institutions in the Northern Namibia. Both primary and secondary information from journal’s and internet was used.

The findings of the study indicated that, even though the farmers are given loans from the bank, farmer’s feels that the money is still not enough for their production purposes. The inputs and implements are too expensive and require huge amount of money. The study also showed that, access to credits in Namibia is further affected by age, sex, level of education, repayment amount of money and payback period.

The study has also reviled that, money is the key to production and without money that there is no production. All the respondents that were interviewed from Etunda have access to credits from Agribank of which they are not asked any collateral. There is necessity for common market place and a value addition facility, such as cold storage facility for small scale vegetable farmers. Agribank of Namibia gives the loan to the farmers with an agreement that the loan will be pay back. Their selection criteria for the farmers to be given loan is not so strict, and it depends on the financial and repayment ability of the client and good credit record.

In conclusion I sum up that the study was not really successful and during data collections, I have experienced some problems, like the farmers are not really free to give or share their information’s with the researcher.

5.2 RECOMMENDATIONS
The study makes the following recommendation: • Credit accessibility is indeed a study that needs to be reviewed and carried out for other farmers that are not under the green scheme. ← It also recommended that the Government of Namibia should give subsidies when small scale vegetable farmers produce vegetable. ← Recommendation that Agricultural/ green scheme policies should be improved, to increase the payback period of money for small scale vegetable producers. ← The last recommendation is that the loan that the farmers are given should be allowed to be used everywhere and changed into money.

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APPENDICES
Appendix 1: Questionnaires
Questionnaires for Etunda irrigation project

Factors affecting small scale vegetable farmers access to credits at Etunda irrigation project in Northern Namibia.
Section A: Respondent general information
1.Date of visit................................................................................................................................
2. Interviewers name.....................................................................................................................
3. Respondents name....................................................................................................................
4. Age: 18-29 30-49 50-69 70-89
5. Sex: Male Female
6. Marital Status: Married Single
7. What is the highest level of education achieved?
None Attended Lower Primary (1-4) Upper Primary (5-7)
Junior Secondary (8-10) Senior Secondary (11-12) Tertiary Education

Section B: Irrigation farming system
8. When did you join the irrigation project and why?
………………………………………………………………………………………………………………………………………………………………………………………………………………
9. Where do you get water for irrigation purposes?
………………………………………………………………………………………………………………………………………………………………………………………………………………
10. What type of the irrigation method are you currently using and why?
Drip irrigation Furrow irrigation
Any other? Specify
………………………………………………………………………………………………………
11. Has the availability of water influenced your production? Explain
………………………………………………………………………………………………………………………………………………………………………………………………………………
12. Has there been a significant change in your total production rate in the last 3 years?
………………………………………………………………………………………………………………………………………………………………………………………………………………
Section C: Land characteristics
13. How big is your irrigated plot?
………………………………………………………………………………………………………………………………………………………………………………………………………………
14. Which vegetable crops are you producing?
………………………………………………………………………………………………………………………………………………………………………………………………………………
15. Which are your most important vegetable crops and why?
………………………………………………………………………………………………………………………………………………………………………………………………………………
16. Is the irrigated land enough for your production?
Yes No
17. Do you need to pay for the land?
Yes No
18. If yes, to who?
………………………………………………………………………………………………………………………………………………………………………………………………………………
Section D: Input
19. Where do you get seeds?
………………………………………………………………………………………………………………………………………………………………………………………………………………
20. Is it easy or difficult to get them and why?
………………………………………………………………………………………………………………………………………………………………………………………………………………
21. Where do you get fertilizers?
………………………………………………………………………………………………………………………………………………………………………………………………………………
22. Is it easy or difficult to get them and why?
………………………………………………………………………………………………………………………………………………………………………………………………………………
23. Do you use any machine? Yes / No
Yes No
24. Who owns the machines that you are using?
Privately owned project owned
Section E: Production
25. Do you produce for family consumption purposes or for selling purposes?
………………………………………………………………………………………………………………………………………………………………………………………………………………
26. Is what you are producing enough and why?
………………………………………………………………………………………………………………………………………………………………………………………………………………
27. Do you have a storage place or facility to keep you products after harvesting?
Yes No
28. Is there competition in producing some products? Specify
………………………………………………………………………………………………………………………………………………………………………………………………………………
29. What type of risks is involved in the production of your products?
………………………………………………………………………………………………………………………………………………………………………………………………………………
30. How do you solve that type of risk?
………………………………………………………………………………………………………………………………………………………………………………………………………………
Section F: Marketing
31. What are your main destination towns?
Ruacana Outapi Oshakati Ondangwa Omuthiya
Other? Specify
………………………………………………………………………………………………………

32. What source of transport are you using in getting your products to consumers?
Own transport Hired transport
Other? Specify
………………………………………………………………………………………………………
33. If it is a hired transport, how much do you pay to the nearest town?
………………………………………………………………………………………………………
34. What type of vegetables do you sell?
……………………………………………………………………………………………………………………………………………………………………………………………………………....
35. Who is selling your products? Themselves or other agents?
……………………………………………………………………………………………………....
36. Who determine the prices of your products?
………………………………………………………………………………………………………
37. Explain the process of your price determination.
………………………………………………………………………………………………………………………………………………………………………………………………………………
38. Is there common market mainly for Etunda irrigation small scale vegetable farmers?
Yes No
39. Are you a member?
Yes No
40. Do you receive market information and from who?
Farmer’s Private institutions Government
Other? Specify
………………………………………………………………………………………………………
Section F: Access to credits
41. Do you have access to formal savings information?
………………………………………………………………………………………………
42. Do you have access to informal savings information?
………………………………………………………………………………………………………
43. If yes, who have access to that saving in the family?
Husband Wife Daughter Son Relative
44. Do you have access to cash loans? And for what purpose?
|Source |purpose |Who borrowed? Wife/|Loan period in |Numbers of years |
| | |husband |months |credits used |
|Bank | | | | | |
|NGO’s | | | | | |
|Cooperatives | | | | | |
|Other | | | | | |

Note: Purpose can be: 1.Payment for hired labor 2.Purchase of fertilizer & seeds 3. Purchase of farm implements 4.To start off farm business 5. Pay transport
45. What type of collateral are they asking?
………………………………………………………………………………………………………………………………………………………………………………………………………………

46. Do you have to pay back the money you borrowed?
………………………………………………………………………………………………………………………………………………………………………………………………………………
47. Do you find it easy paying back the loan and why?
………………………………………………………………………………………………………………………………………………………………………………………………………………

48. Is it easy to get loans from the financial institutions?
………………………………………………………………………………………………………………………………………………………………………………………………………………

49. Does lack of money affects your production? Explain.
………………………………………………………………………………………………………………………………………………………………………………………………………………

-----------------------
Identification of research problem

Literature review

Data collection

Secondary sources (published& unpublished): • Book, Journals, Articles, Internet sources

Primary sources: • Face to face interview • Questionnaire

Data analysis

Results and discussion

Conclusion and Recommendations