SOURCES AND EFFECTS OF RURAL CREDIT SYSTEMS ON SMALLHOLDER FARMING SYSTEMS IN BOTSWANA

To facilitate economic growth in the rural areas the Government of Bot swana has, over the past few years, been giving financial assistance t o smallholder farmers in Botswana. Nevertheless, there are clear indic ations that the problems and issues that led to the establishment of s uch financial assistance schemes are still prevalent, These include hi gh poverty level and low agricultural productivity. To overcome the fi nancial constraints to a greater extent, the smallholder farmers have resorted to credit. The primary concern of this study was to examine t he sources of credit, its effects on farm incomes and its relative imp ortance in the rural areas of Botswana. The data used, come from a far m management survey of 60 randomly selected households conducted in 19 93/94 agricultural year. We concluded that credit is popular and is in a high demand in the area. Most average households' credit came throu gh non institutional (informal) sources. The amount of credit received accounted for 67% of total estimated amount of money required by the farmers at the beginning of the farming season, Farmers used credit ma inly to hire farm labour. Farm incomes were higher among credit recipi ent households (P<0.05). These findings have important implications fo r agricultural and rural development in Botswana. They suggest the nee d for designing appropriate rural credit policies. Such policies shoul d ensure an easy accessibility by most smallholder farmers to existing formal credit institutions in the country. Also, they show that agric ultural finance can influence growth in farm productivity.