A Study of the Factors that Affect the Use of Agricultural Credit among Peasant Farmers in Ethiopia: The Case of Two Districts
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Date
1987-06
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A.A.U
Abstract
A necessary and important ingredient in the development process of
subsistence agriculture is the introduction of improved technology and land
management practices. But these are related to the availability of suitable
agricultural credit facilities. Although several agricultural credit policies
and programmes nave been introduced in Ethiopia very few peasant farmers
have been integrated in to these programmes. More over ,the proportion of private peasant using agriculture credit has remained unsatisfactory
.except for some short-term credit from the Ministry of Agriculture for input
procurement';, agricultural credit services available to the peasant farmers
are still of a rudimentary nature.
In light or these facts, it would be desirable to find concrete explanations
for the low level of credit use by subsistence farmers. Consequently,
the central objective of t he thesis has been the determinations of both
institutional and non-institutional factors which influence subsistence
farmers credit use. since the detailed information base necessary to
forward a solution to the problem is not readily available , the case study
method has been considered to find such details. Towards this end, two
districts were purposively selected on the basis of their response to the
introduction of improved technology . A random sample of two peasant
associations was drawn from each district and from each peasant association
selected , a simple random sample of farm household heads was taken .Data
were collected in the months of March and April 1986.
Both Qualitative and quantitative techniques were used to analyse
the stated objectives. In particular , the techniques of discriminate
analysis and multiple linear regression analysis have been applied to
identify the important socio-economic factors that characterize credit
users and non-users and those which determine the volume of loan absorbed
by a farm household.
'The result of the study has shown that subsistence farmers credit
use has been limited by institutional factors both before the Revolution
and after the revolution. the findings also show that peasant farmers '
credit use is also influenced by a set of social and economic factors .
The level of education, the use of improved technology , the size of operational
area , inadequate market arrangements together with extension service
availability and two of the hypothesised production limitations (need for
more land and product price security) have been observed to be the main
factors which distinguish borrowers from non- borrowers. The age of the
farm household head and investment expenses are also important to classify
farmers as borrowers or non- borrowers
The results of the multiple linear regression analysis have also
indicated that the variations in loan size are explained by a set of
social- economic variables In this regard, income , credit experience, and
value of livestock were found to be the main determinants of loan size .
The study reflects that the formulation of an appropriate agricultural
credit policy together with other complementary services is important in
order to raise agricultural productivity of subsistence farmers in rural
Ethiopia .
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Keywords
Agricultural Credit among Peasant Farmers in Ethiopia, Factors that Affect