Access to Formal Agricultural Credit and Barriers Among Farmers in Kathmandu Valley, Nepal

Abstract

Agriculture remains one of the key sectors in Nepal's economy. However, many farmers struggle to access formal credit to enhance their farm productivity and sustainability. This study assessed farmers’ access to formal credit in Kathmandu Valley and identified the main barriers limiting its use. A sample of 105 farmers from Kathmandu, Bhaktapur, and Lalitpur districts was selected using stratified sampling, based on the proportion of farmers in each district. Data were collected using structured questionnaires. The analysis was conducted using descriptive statistics. The results showed that although 70% of the farmers reported awareness of formal credit institutions, only 27% of them had successfully accessed credit. Among those who accessed credit, most relied on commercial banks and cooperatives with little assistance during the application process. The most significant barriers were long processing times and strict collateral requirements, while high interest was surprisingly not seen as a major issue, possibly due to more pressing concerns. The findings highlight the need to simplify credit procedures, reduce collateral requirements, and provide better guidance and awareness programs for farmers. Addressing these issues is essential for improving financial inclusion and supporting the agricultural sector in Kathmandu Valley.