Factors Affecting Loan Repayment Performance of Smallholder Farmers Gondar Woreda Amhara Region

Abstract

Informal discussion, group interview and field observations were held to generate qualitative data. Binary logit model (to identify factors affecting loan repayment performance of farmers’) and descriptive statistics (to assess the main sources of rural credit) were used for analyzing the required data. The result of the logit model revealed the fact that from the total of twelve explanatory variables, six of Smallholder farmers need improved agricultural technologies such as, improved seeds, fertilizer, pesticides and others that facilitate agricultural production and productivity. In Ethiopia, improved agricultural technologies cannot be used easily by small farmers because of financial problems. They need credit to implement the new technologies. Although there are attempts to solve these rural financial problem by the government through extending rural financial institutions, because of social, economic and institutional factors, a number of farmers can not able to repay their loan for the specific lender institution i.e. loan default is a critical problem of rural financial services. Therefore, the study focused on the analysis of determinants of loan repayment performance of smallholder farmers in Gonder woreda, Amhara National Regional State. In this study, primary data was collected from 300 randomly selected borrowers using semi-structured questionnaire. Structured interview schedule was developed, pre-tested and used for collecting quantitative data for the study from the sampled farm households.