Microfinance services and their effects on smallholder farmers’ incomes and productivity in Eswatini

About 63% of the Swat population live under the poverty line, of which a majority of them make ends meet through smallholder farming. Microfinance institutions in Eswatini are the most powerful tool used by the government and stakeholders in eradicating poverty through granting their services to the financially excluded smallholder farmers. However, the effects of microfinance on smallholders' wellbeing, improvement, income and productivity remain a mystery. The study sought to understand the contributions of microfinance services towards improved incomes and productivity of maize and sugar cane farmers in the Lubombo Region. Stratified random sampling was used to identify the 202 smallholder farmers who participated in the study, beneficiaries and non-beneficiaries of microfinance. Purposive sampling was also used to determine the two microfinance institutions. Data were analysed using descriptive statistics, STATA and Statistical Package for the Social Sciences (SPSS). Descriptive statistics were used to identify the operating microfinance institutions in the country and the types of services provided. Levels of credit repayment among the farmers and challenges faced by microfinance clients inhibiting their success were also assessed using descriptive statistics. A Mann Whitney U test was applied to determine microfinance services' impact on smallholders' incomes and productivity. Finally, a fractional logit regression was employed to assess the credit repayment factors of the microfinance beneficiaries. The Mann Whitney U Test indicated that beneficiaries had improved incomes and productivity compared to their counterparts. Comparisons were made from incomes and productivity generated from maize production, on the ownership of machinery and farming implements, home and farm investments and finally on economic and social statuses between the two farmer groups. The fractional regression results indicated that level of education, the sufficiency of the loan, extension services, distance and the amount of credit received by borrowers significantly determined the loan repayment among the smallholder farmers in the study area. Descriptive statistics revealed that more males participated in microfinance services, yet only 22.8% of women were given credit. Credit was also shown as the most popular and used service that 99.2% of the beneficiaries used. A gap is seen in the lower participation levels of women to microfinance institutions and skewness of the uptake of services provided by the institutions. v Therefore, the study recommends that more research be done on women's challenges when seeking for credit from microfinance institutions. It is also recommended that microfinance institutions should familiarise farmers with the different types of services provided.College of Agriculture and Environmental Science