Loan Repayment Performance of Smallholder Farmers: The Case of Oromia Credit and Savings Share Company in Tole District of Southwest Shoa Zone, Oromia Regional State, Ethiopia

Abstract

The aims this study is to identify those factors that affect loan repayment performances of smallholder farmer in Tole district of Southwest Shoa zone, Oromia regional state of Ethiopia. In order to address the stated objective data were collected through survey of 174 sample borrower farmer. To identify and analysis factors affecting loan repayment performances and intensity of loan recovery in the district two-limit Tobit model were used. From the total sample borrower farmer, 9.2%, 20.7% and 70.1% were complete defaulters, partial defaulters and non-defaulters respectively. A total of 17 explanatory variables were included in the analysis from which family expenditure and repayment period suitability affect loan repayment performance and intensity of loan recovery of the sample borrower farmer significantly and negatively. On the other hand, size of land holding, income from on-farm activities, income from off-farm activities, household saving and frequency of extension contact had a significantly and positively affect loan repayment performance and intensity of loan recovery of sampled smallholder farmer in the study area. Therefore, each concerned body aimed to improve loan repayment performances of smallholder farmer in the study area could be successful if they consider these factors.

Keywords: Ethiopia, Loan, Non-defaulter, Tobit

DOI: 10.7176/RHSS/12-13-04

Publication date:July 31^st 2022