Factors affecting vegetable farmers' participation in the formal credit program and intensity of borrowing in Kavrepalanchok district, Nepal: A Double Hurdle Approach

Abstract

The Agriculture Development Strategy (2015–2035) identifies credit as a key instrument for enhancing food security and reducing poverty. The Government of Nepal has prioritized agricultural financing by implementing an interest-subsidized credit program. However, there is limited understanding regarding the factors that influence farmers’ decisions to participate in credit programs. This study examines the determinants of access to agricultural credit among vegetable farming households of Kavrepalanchok district, Nepal. A total of 166 vegetable farming households were interviewed, and data were analyzed using the Double hurdle model. The results revealed that information about the credit scheme and the amount of non-farm income significantly and positively influenced farmers’ decisions to participate in the credit program, while occupation had a negative effect. Furthermore, the intensity of borrowing by households was positively associated with the investment plan, credit experience, and family size, whereas the interest rate negatively affected loan amounts. These findings underscore the need to enhance farmers’ capacity to formulate investment strategies, diversify income sources, and conduct financial literacy programs to raise awareness about credit programs for improving credit access.