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Non-PR, IFPRI5; 1 Fostering Climate-Resilient and Sustainable Food Supply; 4 Transforming Agricultural and Rural Economies; G Cross-cutting gender theme, Development Strategies and Governance (DSG); Transformation Strategies; Natural Resources and Resilience (NRR), Farmers, entrepreneurs, and businesses are already leading the way by expanding irrigation in response to climate variability and the growing demand for vegetables and fruit through supplemental and dry-season irrigated production. Increasing commercialization creates market opportunities throughout irrigated value chains. The Feed the Future Innovation Lab for Small Scale Irrigation (ILSSI), has supported research and partnerships with companies and producer groups to innovate technologies, share information, and develop inclusive, market-based approaches that catalyze investment in irrigation.

PR, Capacity Strengthening; IFPRI3; Feed the Future Innovation Laboratory for Small-Scale Irrigation; 4 Transforming Agricultural and Rural Economies; 5 Strengthening Institutions and Governance; CRP5; IFPRIOA; ISI, DSGD; EPTD, CGIAR Research Program on Water, Land and Ecosystems (WLE), Credit constraint is often considered as one of the key barriers to the adoption of modern agricultural technologies and low agricultural productivity in low- and middle-income countries. Past research and much of the policy discourse associate agricultural credit constraints with supply-side factors, such as limited access to credit sources or high costs of borrowing. However, demand-side factors, such as risk-aversion and financial illiteracy among borrowers could also affect credit-rationing of smallholder agricultural households. This study investigates the nature of credit constraints, factors affecting credit constraint status, and the effects of credit constraints on adoption and intensity of use of three modern agricultural technologies – small-scale irrigation, chemical fertilizer, and improved seeds. The paper also assesses whether credit constraints are gender-differentiated. Primary survey data were collected from sample farmers in Ethiopia and Tanzania, and Tobit and two-step hurdle econometric models were used to analyze these data. Results show that demand-side credit constraints are as important as supply-side factors in conditioning smallholders’ access to credit in both countries. We also find that credit is a binding constraint for the decision to adopt technologies and input use intensity in Tanzania but not statistically significant in Ethiopia. Results suggest that women are more likely to be credit constrained (from both the supply and demand sides) than men in both study countries. Based on these findings, we suggest that policies should focus on addressing both supply- and demand-side credit constraints to credit access, including through targeted interventions to reduce risk, such as crop insurance, and to strengthen the gender sensitivity of credit policies.