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2008-10-20 | Discussion Paper

Will availing credit incentives to Zimbabwean farmers trigger a maize output response?

Musuna, S. and E. Muchapondwa (2008). "Will availing credit incentives to Zimbabwean farmers trigger a maize output response?" ERSA Working Paper No. 100 (October)
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This paper evaluates the impact of credit availability on communal and commercial sector maize output in Zimbabwe. This is important given the increased use of concessionary credit for agriculture as a policy strategy to increase agricultural output and food security, in response to the disruption caused by controversial land reform.

The results show that communal sector maize output does not respond to credit availability. Neither does it respond to area under cultivation. Rainfall is the single most important driver of communal agriculture. The commercial sector responds to credit incentives albeit with a very low elasticity. Therefore, credit availability is a rather impotent device for enhancing maize output and, generally, agricultural output in Zimbabwe. Since most of the newly resettled farmers typically operate like communal farmers, both the land reform programme and concessionary credit for agriculture will not be likely to increase agricultural output. An urgent review of the beneficiaries of the controversial land reform programme is needed to ensure that only profit maximizing farmers will have their landownership confirmed, while unproductive farmers are replaced, if the agricultural sector is to help revive the Zimbabwean economy. Thus, commercialisation - rather than communalisation - of the agricultural sector is the appropriate strategy to trigger an increased agricultural output response.

By Sophia Musuna and Edwin Muchapondwa