Impact of credit on sustainable agriculture

Abstract

Access to credit is widely considered a cornerstone of agricultural development and a potential enabler of sustainable agricultural practices (SAPs). This paper synthesizes empirical evidence and reviews (2019–2025) to evaluate how credit affects adoption of SAPs, farm productivity, income, and environmental outcomes. The literature shows mixed results: several high-quality studies find that formal credit increases investment in inputs and can raise yields and incomes, while randomized and quasi-experimental studies report heterogeneous impacts depending on product design, farmer capacity, and complementary services. Importantly, when credit is combined with technical assistance, input provision, or climate-smart financing, the likelihood of positive sustainability outcomes rises. However, poorly designed or short-term credit can incentivize intensive input use (e.g., higher fertilizer/pesticide use) that may harm environmental sustainability. Policy implications emphasize tailored financial products, linkages with extension and insurance, green credit incentives, and monitoring of environmental impacts. Gaps for future research include long-term ecological outcomes, product design experiments, and distributional effects across smallholder groups.