Supply Side Factors Constraining the Credit Advanceto Farmers in the Agricultural Sector in Lesotho

Agricultural credit enhances productivity and promotes standard of living by breaking vicious cycle of poverty of small scale farmers, hence, an essential element for agricultural growth in developing countries. The study assessed supply side factors constraining access to agricultural credit among smallholder farmers in the Kingdom of Lesotho. Two hundred (200) respondents from the fifty (50) formal credit service providers were involved through purposive sampling, and a structured questionnaire was used to solicit data for this study. Data were analysed using frequencies and percentages as well as probit regression model. Results show that commercial banks account for only 8% of credit service providers while money lenders make up 92% of formal credit service providers in the country. Availability of Packages for Agriculture (?=2.862), (p=0.041), Capacity to Manage Smallholders (?=1.673), (p=0.024) and Loan Processing Costs (?=1.089), (p=0.033) have restricted commercial banks from granting agricultural loans to smallholder farmers in Lesotho while Money Available for Lending (?=1.679), (p=0.021), Preferred Target Market (?=-1.897), (p=0.030) and Availability of Packages for Agriculture (?=1.987), (p=0.035) have restricted money lenders from providing agricultural credit to Basotho farming communities. Based on these, it is concluded that the supply side factors constrain farmers' access to agricultural credit in Lesotho. In light of these, it is recommended that special agricultural credit plans outlining agricultural credit targets for achievement during the financial year be developed and adopted by formal credit services providers. Furthermore, credit guarantee scheme for the farming sector be introduced by the Kingdom's government.