Determinants of Coffee Producing Farmers’ Access to Formal Credit in Bodji Dirmeji District of West Wollega Zone, Northwest Ethiopia

Abstract

This study was aimed at analyzing determinants of access to formal credit to coffee farmers in Bodji Dirmeji district of West Wollega, Ethiopia with specific objectives to identify the sources of formal credit to coffee farmers, and identifying the determinants of coffee producing farmers’ access to formal credit. Multi-stage sampling technique was employed to select coffee producer households for the study. The primary data for this study were collected from 168 coffee farmers. Formal sources include the CBE, MFI, and cooperatives. Probit estimation method was used to identify the determinants of access to formal credit. Specifically, access to formal credit is positively influenced by level of education, sex and extension contact frequency, and negatively influenced by the family size, lack of opportunity to second loan, perception of group lending and perception of lending procedures. Therefore, policy aimed to accelerate coffee farmers in the area could be successful if these factors and problems are taken into consideration.

Keywords: coffee, formal credit, probit