DefinePK

Abstract

Improving cotton production is undoubtedly one of the greatest challenges facing the Zimbabwean government today. Since cotton is an important cash crop for the country and for individual households, it has important implications for livelihoods of rural people. In order to achieve this, several interventions in the sector are done in an attempt to improve production. Some of the strategies include financing the out grower cotton schemes through private players. However, rural farmers are experiencing challenges in loan repayment to lending organizations. Poor loan repayment performance had become a norm amongst the out grower farmers and has resulted in institutional failure in the implementation of correct measures and credit policies by the merchants. The study therefore examined factors affecting the poor performance of cotton farmers in loan repayment. A total of 400 respondents were administered with structured questionnaires to provide the relevant information. The information was gathered from respondents in Sanyati District using the multistage sampling technique. A two limit Tobit regression model was applied to analyze the socio-economic factors that influenced loan repayment performance by cotton out grower farmers and the multinomial logistic model was also used to analyze factors that influence loan defaulting among cotton out grower farmers. The results show that farmers did not receive their loans on time and also there was no loan supervision for grower farmers. Two limit Tobit model shows that 5 out of 14 variables included in the model were statistically significant at 5% significance. The variables include other loans due, household size, land size and farming experience. It is concluded that, there is serious poor loan repayment performance among cotton out grower farmers in the study area, which discourages private companies in extending credit facilities to cotton farmers.