Exploring Microcredit Utilisation Patterns among Smallholder Farmers in Tanzania: Insights from a Multinomial Logistic Regression Approach

Purpose This study examines microcredit utilisation patterns among smallholder farmers in Morogoro region of Tanzania. It challenges the assumption that access to microcredit enhances farm productivity by revealing diverse usage behaviours that extend beyond agricultural goals. Design/Methodology/Approach: A cross-sectional design was employed, involving 240 smallholder farmers. Descriptive analysis and multinomial logistic regression were used to investigate the diverse microcredit utilization patterns given its suitability for modelling categorical outcome variables. Findings: The results reveal that 47.1 percent of smallholder farmers utilised microcredit exclusively for agricultural purposes, whereas 28.7 percent diverted the funds to non-agricultural uses, including food, healthcare, education, and social obligations. Meanwhile, 24.2 percent used microcredit for both farm and non-farm activities. This highlights the multifunctional role of microcredit within rural livelihoods. Male farmers were more likely to use microcredit for non-farm purposes, whereas higher education levels were linked to less diversion. Household health and headship dynamics also played significant roles in influencing spending decisions. Practical Implications: The study recommends that policymakers and microfinance institutions enhance borrower training and monitoring systems to promote effective loan utilisation. Moreover, the development of customised credit products aligned with farming seasons could further strengthen productivity outcomes. Originality/Value: Unlike prior studies that focus predominantly on microcredit access, this research emphasises the behavioural patterns of microcredit usage among smallholder farmers. It offers valuable insights into the interplay between financial behaviour and agricultural performance, thereby contributing to the broader discourse on financial inclusion and rural development in Sub-Saharan Africa.