A. Kabayiza - Department of Rural Development and Agricultural Economics, University of Rwanda, Rwanda.
G. Owuor - Department of Agricultural Economics and Agribusiness Management, Egerton University, Kenya.
J. K. Langat - Department of Agricultural Economics and Agribusiness Management, Egerton University, Kenya.
F. Niyitanga - Department of Rural Development and Agricultural Economics, University of Rwanda, Rwanda.

Credit is a major tool and an important factor for tea production and farm outcome. Its demand from different lending sources has been increasing to meet capital investment in the tea sector. Accessed credit is to meet costs of tea production, mainly fertilizers, seedlings, and labor as well. Factors affecting access to credit have been a subject of vast debate in recent studies that credit seekers obtain credits only when they are eligible by complying with the requirements set by lending institutions. However, literature has limited findings on the behavior of small-scale borrowers in selecting a credit source and inducing factors. In particular, borrowing arrangements necessitate the analysis to inform policy makers on needed adjustment in the lending system to improve tea production and sector development. The study aims at disclosing responsible factors to choose a particular credit source by smallholder tea farmers. A survey was conducted with ۳۵۸ tea growers selected randomly in two cooperatives that operated in Nyaruguru District. A multivariate probit model was used for analytical analysis. Borrowing from formal source (commercial banks) increased if borrower possessed collateral asset (۸۵.۵%), interest rate (۸۵.۰%) size of tea plantation (۲۴.۸%) and household composition (۱۰.۵%). Using informal sources increased if a farmer desired a small credit (۸۳.۲%), participated in technical training (۷۶.۹%), and received joint credit (۴۶.۹%), while a farmer was likely to use less informal sources if his/her farm size (۳۹.۹%) and household income (۲۹.۲%) were small. However, combining sources of credit was used by farmers as a safeguard strategy to acquire the desired loan. A government policy, which aims to increase productive investment, should emphasize integrating agricultural loans in financial system targeting smallholder farmers through their organizations where they can relax credit constraints.

Credit constraints, Formal loan sources, Government policy, Informal loan source.