High Demand and Limited Access to Agricultural Credit: Evidence from Farmers in Nangarhar Province, Afghanistan

Abstract

Agricultural credit plays a critical role in enhancing farm productivity and sustaining rural livelihoods in developing economies characterized by capital-constrained smallholders. This study examines farmers' credit demand, its structure, and the barriers affecting access to formal financial services. Primary data were collected through a structured questionnaire administered to 240 farmers across ten districts of Nangarhar Province. Descriptive statistics, Likert-scale analysis, and cross-tabulations were used to analyze credit demand and utilization. The results revealed that 90.42% of surveyed farmers expressed a demand for agricultural credit, with 40.0% reporting a very high level of demand, while 62.5% of respondents identified government sources as their preferred source of credit. However, only 11.3% of respondents were aware of formal credit programs. Collateral availability emerged as a significant barrier, as only 38% of households possessed formal land documentation. Farmers primarily demanded small-ticket loans: 79.73% of respondents reported a credit demand of less than AFN 200,000 for seasonal input purchases. In addition, farmers showed a strong preference for installment-based and seasonal repayment schedules. These findings highlight a structural paradox: while farmers recognize the importance of credit for improving agricultural productivity, institutional barriers continue to limit access to formal financial systems. Policy recommendations include expanding financial services, strengthening awareness campaigns, introducing alternative collateral mechanisms, aligning repayment schedules with agricultural cycles, and linking credit provision with extension services. The study provides actionable insights for policymakers and financial institutions seeking to design inclusive and accessible credit schemes tailored to the needs of smallholder farmers in Nangarhar Province.