Observations on the Mbulu small farmer : food crop loan program

Special evaluation covers the period 1974/75-3/78 and is based on reports by the implementing agency, the Tanzanian Rural Development Bank (TRDB), and a survey of farmers in Mbulu District. The survey of 78 borrowers and non-borrowers in six loan and six non-loan villages revealed that the Small Farmer Food Crop Loan Program (SFFCLP), while serving its target group (i.e., farmers with less than 20 ha), was not really meeting the needs of the poor, given an average Tanzanian farm size of 1.25 ha. Since participation in the SFFCLP depended on village initiative, it was not surprising that loan villages were found to be older, established, registered villages; had prior experience in obtaining loans; were proximate to the administrative center of Karatu and thus had greater access to information and government officials; and produced and sold surplus output, usually wheat. There was a clear tendency for loans to go to those with larger holdings (5-10 versus 3 acres), greater access to modern inputs and techniques, and above average income. Neither the level of farmer education and nor farmer contact with extensionists proved relevant. Although slightly higher than in other Tanzanian loan programs, the 83% repayment rate (ranging from 42-100% in different villages) was short of the 90% rate required for SFFCLP viabilty given the TRDB's 9% interest rate. Although loan payments were to be deducted from village crop sales, many farmers avoided this by finding other sales outlets or by using their loans for non-production activities from the start. Moreover, many farmers, used to lax loan administration and repayment, felt obliged to retaliate against perceived TRDB intransigence and injustice. The SFFCLP is also plagued by other administrative problems: widespread ignorance of the program, infrequent field visits by supervisors, insufficient manpower to monitor farmers' use of project inputs, and reliance on ad hoc loan administration at the village level. The evaluators thus conclude that the SFFCLP cannot be justified on the basis of serving the very poor, raising wheat yield, or providing farmers with otherwise unobtainable inputs.