Factors Affecting Smallholder Farmers Access to Formal Credit (Desci) In Saharti Samre Woreda, Tigray; Ethiopia

Abstract

The study was sought to ascertain factors affecting smallholder farmer’s access to formal credit. A multi stage simple random sampling method was employed to select four out of twenty three rural peasant associations and 160 farm households were selected, out of these sample households 157 respond the questioner. Structured questioner was developed, pre tested and used for collecting data for the study from the sampled farm households. Descriptive statistics and logit model were used for analyzing the data. The output from the study indicates that 72 (45.86%) of the sampled farm households were formal credit users, whereas the remaining 85 (54.14%) were non-users. It was also found out that credit access to female headed households indicates that 65.22% of the total female headed households were not accessed and 34.78% accessed, still access to formal credit were limited and the difference between the two household heads in accessing credit from the formal sources was statistically significant. Logit model was used to access factors affecting smallholder farmer’s access to formal credit in the study area. the results of the model revealed that, out of the eighteen variables ten of them are significant namely age of the household, agricultural extension service, education level, Participating in extension package program, gender of household, size of the household, family labor, distance from the center, membership village saving and credit association, and off farm income were statistically significant. Those variables are the factors affecting rural household’s access to formal credit. Seven from the remaining variables became insignificant namely, lack of opportunity to take second loan, group lending, loan repayment period, lending procedure, number of animals owned, farm size and farm record, was less powerful in explaining the variation in the two groups. The remaining one variable, experience in credit use were exclude from the model.