Evaluation of the Determinants of Smallholder Farmers’ Access to Credit in East Wollega Zone: In Case of Guto Gidda District, Ethiopia

Abstract

Improving access to finance service helps smallholder farmers to improve production and productivity through investment in irrigation, production equipment and inputs and in postharvest handling, processing and marketing. However, the majority of the rural population does not have access to the agricultural financial system. This study is concerned with evaluating determinants of smallholder farmers’ access to credit. A two stage sampling method was used to select sample respondent. A total of 200 small holder farmers were selected randomly using probability proportional to size. Descriptive statistics and logit model were used to analyze the data. The result of the study indicate that  access to formal credit by smallholder farmers is determined by educational Level, farm size, non-farm income, interest rate, collateral security, rigid repayment period, and lending procedure. Out of those determining variables, level of education, Farm size and non-farm income were found increase the likelihood of farmers access to formal credit financial service. On other hand, variables like Interest rate, collateral security, rigid repayment period, and lending procedure decreases the likelihood of access to credit. Therefore, the government should have to consider these factors through its policy aimed to speed up agricultural development.

DOI: 10.7176/RJFA/12-1-01

Publication date: January 31^st 2021