Determinants of agricultural credit market participation and loan repayment performance in Finoteselam town, Northwestern Ethiopa
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- Master's theses (HH) 
Ethiopia is one of the world’s poorest nations with a per capita income of about US$157. About 44% of the population live below poverty line. Farmers often lack financial resources to make necessary investments in agriculture. The formal financial services provided by banks are less accessible to poor farmers. Although the informal moneylenders are accessible to the poor farmers, the interest rates charged are very high. As a result, providing rural financial services through microfinance institutions has become part of the poverty reduction strategies of most developing economies. This research was undertaken at Finoteselam Town, Northwestern Ethiopia. It was done with the objectives of estimating the parameters that determine credit market participation and loan repayment performance. Primary data from 200 households were collected through a questionnaire survey during the summer period in 2006. The bivariate probit and logit models were estimated using Stata software. Estimation results of the bivariate probit model indicated that variables such as higher family size, large landholding size, household’s labour endowment, participation in off farm employment activities and incurring unforeseen expenses increased the probability of households to participate in credit markets. On the other hand, variables such as village dummy and borrowing from other sources decreased the probability of households to participate in the credit scheme. Estimation results of the logit model revealed that variables such as higher family size, incurring unforeseen expenses, and taking loans for the purpose of oxen fattening decreased the probability of repayment performances. On the other hand, variables such as participation in off farm employment activities and an increase in loan term increased the probability of loan repayment performances. Microfinance institutions like ACSI should target those poor households that participate in off farm employment activities, and those with better labour endowment. They should also focus on supervision of clients so as to avoid diversion of loans to consumption ends due to unforeseen expenses, or higher dependency burden. Family planning, creating enabling conditions for insurance markets, and enhancing labour markets are areas of policy concerns.