Human capital, financial capital, and the practice-mediated pathway to sustainable livelihoods among smallholder farmers in Southern Highland Tanzania

Abstract

Background : Agricultural extension services and financial inclusion are widely recognized as dual pillars of smallholder agricultural transformation, yet their combined mediating influence on sustainable agricultural practices and livelihood outcomes remains underexplored in the Tanzanian context. This study addresses that gap by being, to our knowledge, the first investigation to empirically test sustainable agricultural practices as the behavioral mechanism mediating the extension services-financial inclusion-livelihood nexus among smallholder farmers in Tanzania’s Southern Highlands, thereby extending the Sustainable Livelihoods Framework beyond its conventional asset-based orientation. Methods : This study investigates the interlinkages between extension services, financial inclusion, sustainable agricultural practices, and livelihood outcomes using cross-sectional survey data from 478 smallholder farmers across seven regions of Tanzania’s Southern Highlands (Iringa, Njombe, Mbeya, Rukwa, Ruvuma, Katavi, and Songwe). Results : Structural equation modeling through path analysis reveals that sustainable agricultural practices are the strongest predictor of livelihood outcomes (β = 0.481, p < 0.001), followed by extension services (β = 0.272, p < 0.001) and financial inclusion (β = 0.178, p < 0.001). The model explains 69.2% of the variance in livelihood outcomes and 50.3% in sustainable practices. Mediation analysis demonstrates that sustainable practices mediate 51.4% of the total effect of extension services on livelihoods (Sobel Z = 9.05, p < 0.001) and 27.6% of the financial inclusion effect (Sobel Z = 2.85, p < 0.01). Cooperative members exhibited significantly higher scores across extension service items (p < 0.001), financial inclusion indicators (p < 0.001), and economic resilience (p = 0.001). The sample is youth-dominated (75% aged 18–35), with 67.5% operating on 1–5 acres and 78.5% earning below TZS 300,000 monthly. Conclusions : These findings advance the Sustainable Livelihoods Framework by demonstrating the mediation mechanism through which service delivery translates into tangible welfare improvements, providing an evidence base for integrated policy interventions.