Impact of village bank membership on households’ welfare in Ngaka Modiri Molema District Municipality, South Africa

Access to credit is one of the key elements in raising agricultural productivity, and it is a powerful channel for poverty alleviation among smallholding farmers. This study examines the effect of village bank membership on the welfare of smallholder farmers in Ngaka Modiri Molema District Municipality (NMMDM). Using cross sectional data from three villages where village banks was established in the study area, a representative sample of two hundred (200) farmers was obtained using structured questionnaires. Descriptive statistics and simultaneous equation model (SEM) were used for data analysis. The results show that membership in village banking increased per capita expenditure by 83.85% and variables such as income per capita (p < 0.01) and technology applied (p < 0.05) positively influenced per capita expenditure. It was concluded that village bank members had better socioeconomic characteristic which can help them to enhance their welfare. Therefore, creation of more community based village banks holds significant welfare implications in South Africa.