Socio-Economic Determinants of Credit Service Utilization by Smallholder Households at Wolaita Zone, Ethiopia

Abstract

The objective of the study was to identify the determinants of credit service utilization in the study area. In this study multi-stage sampling techniques were used to select 5 kebeles out of 42 kebeles of the study area and 150 sample households were randomly selected, of which 82 were credit users and 68 of them were non-users. Primary data were collected through structured interview schedule. Various documents were reviewed to collect the secondary data. In the study Econometric model (binary logit model) was used to identify the determinants of credit service utilization. A total of fifteen explanatory variables were included in the model. Out of these, seven were found to be statistically significant and most of the coefficients of these variables exhibited the expected signs with the hypothesis. These variables include total income, saving habit, collateral type, training and technical advice, possession of fixed assets, risk fearing and lending procedure. Therefore, credit service providers should give attention to factors that significantly influence credit service utilization in order to improve the performance of microfinance service provision and credit service utilization.

Keywords: Credit, binary logistic regression model, Determinants, Credit Utilization, Smallholder Households, Wolaita Zone