Analysis of the Impact of Credit on Smallholder Farmers’ Income, Expenditure and Asset Holding in Edja District, Guraghe Zone, SNNPR, Ethiopia

Abstract

Smallholder farmers in Ethiopia cannot fully utilize improved agricultural technologies and recommended amount of inputs by using their own funds. They need credit to solve the liquidity constraint thereby to properly adopt new technologies. Therefore, the major concern of this study was to assess the impact of credit from MFIs on smallholder farmers’ income, expenditure and asset holding. 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 from the total number of households of each sampled kebeles. In addition, secondary data were collected from relevant organizations. Propensity Score Matching Technique was employed to analyze the impact of credit on smallholder farmers’ income, expenditure and asset holding. The result of the study revealed that keeping other things constant, access to credit has significant impact on farmers’ income, expenditure and asset holding. Therefore, promoting microfinance institutions in wider range of areas and providing farmers with other factors of production are critical factors that needs be practiced by stakeholders in the study area.

Keywords: Micro- finance, Credit, Impact, Propensity Score Matching.