Assessing the impact of credit finance on agricultural productivity in Namibia
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Date
2024
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Publisher
University of Namibia
Abstract
This thesis explores the impact of credit finance on agricultural productivity in Namibia,
with the goal of promoting innovative, economically oriented, and modern agriculture to
enhance rural living standards and drive food production. The study utilizes the bounds
test (ARDL) approach to cointegration, analysing quarterly data from 2001 to 2022 to
examine the short-run and long-run dynamics between credit finance and agricultural
productivity. The empirical findings indicate that credit finance and prime lending rates
have a significant negative impact on agricultural productivity at a 1% level, consistent
with prior research. Inflation was found to negatively affect agricultural productivity but
was insignificant. The stability of the model was confirmed using the CUSUM of squares,
validating the use of the ARDL agricultural gross domestic product function as a target
variable. The analysis reveals a unidirectional causality, with agricultural productivity
predicting credit. Based on the study's findings, several major policy recommendations
are proposed. Firstly, the Namibian government should focus on enhancing the banking
sectors to improve farmers' access to credit and financial services, including measures
such as financial inclusion, expanded banking services in rural areas, and facilitation of
loan availability. Secondly, efforts should be made to develop well-functioning rural loan
markets that cater specifically to the agricultural sector, through initiatives such as
establishing specialized agricultural financing institutions, providing credit guarantees,
and promoting financial literacy programs tailored to the agricultural sector. Thirdly, the
development of township banking infrastructure in rural areas can enhance access to
financial services and credit for farmers, either through banking branches or mobile
banking services. Lastly, short-term and long-term plans should be formulated to support
agricultural growth, including enhancing agricultural extension services, promoting
technology adoption, improving market access for agricultural products, and
strengthening policy and institutional support for the agricultural sector. This study's
conclusions emphasize the significant role of credit finance in shaping agricultural
productivity and the importance of sustained investment in enhancing productivity over
time. The interdependencies among agricultural productivity, credit finance, inflation rate,
and prime lending rate underscore the need for a comprehensive understanding of their
dynamics
Description
Thesis submitted in partial fulfilment of the requirements for the degree of master of science in economics
Keywords
Agricultural, Productivity, Credit, ARDL, Cointegration