Analysis of Determinants of Access to Credit among Smallholder Farmers in Edja District, Guraghe Zone, SNNPR, Ethiopia

Abstract

Efficiency in production requires utilization of improved technologies. Smallholder farmers in Ethiopia cannot adopt improved agricultural technologies using their savings. Therefore, the dependence of the subsistent farmers on financial institutions for credit has become substantially increasing nowadays. The major concern of this study was to identify factors that determine farmers’ access to credit from Micro- finances. For the purpose of the study primary data were collected from three sample kebeles. A total of 120 households comprising 60 credit users and 60 non-users were selected randomly in each sampled kebeles. In addition, secondary data were collected from relevant organizations. Descriptive statistics such as mean and percentage were used for analyzing the data. Moreover, t-test and χ2 - test were employed to compare credit users and non-users with respect to the hypothesized and other related variables. A binary logit model was employed to examine factors influencing microfinance credit access. The education level of the household head, age of the household head, the household size, non and/off-farm income of the household and size of cultivated land were important factors influencing farmers’ credit access. Promoting microfinance institutions in wider range of areas, providing farmers with other factors of production and adding non and/off-farm income generating activities are critical factors that should be practiced by stakeholders in the study area to increase farmers’ access to microfinance credit.

Keywords: Micro Finance, Credit, Logistic regression