FACTORS AFFECTING SMALL HOLDER FARMERS’ ACCESS TO FORMAL CREDIT SOURCE IN ABESHEGE DISTRICT, GURAGE ZONE, ETHIOPIA
Date
2019-01
Journal Title
Journal ISSN
Volume Title
Publisher
WOLKITE UNIVERSITY
Abstract
In Ethiopia, among other things, lack of finance is one of the fundamental problems
hampering production, productivity and income of rural farm households. Since access to
institutional finance is very limited, the majority of the poor are forced to search financial
services through informal channels. The study was sought to ascertain factors that affect
smallholder farmer’s access to formal credit and also the status of women and different
wealth groups’ access to formal and informal credit sources in the study area. A two stage
sampling method was employed to select three out of eighteen rural peasant associations and
130 farm households. Structured interview schedule was developed, pre-tested and used for
collecting quantitative data for the study from the sampled farm households. Focus group
discussion, group interview and field observations were held to generate qualitative data.
Descriptive statistics and logit model were used for analyzing quantitative data. Farmers
acknowledge group lending that solves the problem of collateral requirement by lending
institutions, controls misuse of borrowed funds and minimizes the risk of default and they also
recognize the provision of saving services by MFI, while strongly criticizing the isolation of
very poor farmers from the group formation. Moreover, the smaller loan size, earlier saving
requirement which was not convenient to the farmers, and repayment period by the MFI were
among the critical problems