Does Poor Access to Rural Credit Constrain Smallholder Cash Crop Production Participation? Evidence from Wolaita Zone, Ethiopia

Abstract

Agriculture sector continues to lead Ethiopia’s economy as modernizing the sector necessitates linking smallholder farmers with markets. Promoting cash crop production is one avenue of such strategies. However, constrained by a number of factors, smallholder farmers are not actively participating in such crops in many parts of the country such as in Wolaita Zone. This study was designed to empirically analyze the impact of credit constraints on smallholder’s cash crop production participation. Primary data was used and logit model was employed to analyze the issue. The study result indicates that, access to credit is one among the significant factors in influencing farmers’ decision to produce ginger in the study area. Improving rural credit access can be taken as an important strategy to promote increased and sustainable ginger production in the study area as one venue to improve smallholder market participation in the zone.

Keywords: Cash Crop, Access to credit, Ginger, Smallholder Commercialization, Wolaita Zone.