Gender characteristics of the determinants of access to formal credit in rural Zanzibar

Despite the ongoing financial reforms undertaken in many developing countries, the majority of smallholder farmers still report limited access to formal credit. It is often argued that women are particularly more credit constrained than men. Various studies conducted in many developing countries suggest that access to credit is influenced by both institutional factors as well as by household socio-economic characteristics. However, most of these studies have generalized the effect without the concern of gender. This study was therefore conducted in order to determine the gender characteristics of the determinants of rural households’ access to credit in the formal credit markets. The specific research question addressed is whether factors that influence rural household access to credit differ by gender or not. In conducting this study, both primary and secondary data were collected. The data collection took place between May and June, 2006, covering the five districts of Unguja and Pemba islands. In total, 750 households were surveyed. The analysis of the data collected was done using SPSS 17.0 computer software. Both descriptive and econometric statistics were analyzed and discussed. The econometric analysis was meant to determine the gender characteristics of the determinants of credit-constrained households, focusing on the formal credit market by using a Probit model with Heckman procedures. The results of the Probit model show that male and female heads being credit constrained are influenced by different set of factors. For male heads, the degree of market integration as well as the wealth and risk-bearing indicators (value of productive assets owned and household income level) are significant indicators in determining whether a household is credit constrained. For female heads, only the household income level was found to be a significant factor for a household being credit constrained.The results from the second equation (Heckman Procedure) further suggest that human capital (education) and wealth and risk-bearing factors (keeping financial records, value of productive assets owned, household income level) are significant factors in determining the intensity of use of formal credit among male heads. On the other hand, the value of productive assets owned and the leadership status are factors that significantly influence the intensity of using formal credit among female heads. Generally, these findings suggest the need to develop gender-specific interventions to enhance access to credit in the formal credit markets.