[lent of Access to Formal Credit and its Challenges for Households: The Case of Mareko Worda,Guraghe Zone in SNNPR.
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Date
2011
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Addis Ababa University
Abstract
Credit plays an important role in agricultural development, and it is believed that
expansion of credit program will have beneficial effects on agricultural production and
improving rural household's incomes. It is also a key to poverty alleviation, livelihood
diversification, and increase the business skill of rural households. In the study area, the
rural households dependent on subsistence farming, and their loan is mostly from
informal lender, thus access to formal credit remains low. There is a need to examine,
fiuĀ·ther rural households access to formal credit, and determine the factors that influence
accessibility of formal credit and identifY the major challenges of accessibility to credit.
The survey questioner distributed to 120 respondents, interview with key informant, and
focus group desiccation with farmers employed to data analysis. The major methods of
analysis ill this study were both descriptive analysis and logistic regression model to meet on
the aforementioned objectives '. Out of 120 respondents 41 of them have access to credit
during the time of the study. Access to credit by rural household was limited & credit
service in the research area was not well served. Thus farmer's needs of credit led them
tn borrow from informal leaders. In this study a combination of demographic, econumic
and institutional factors found to influence access to credit. The major challenges of
access for credit in the study area are lending group formation, credit collateral, high
interest rate, limited number of MFI, lack of awareness and fear of risk are, restricted the
fanners Fom accessing forma l credit. It is recommended that accessibility to credit by
small farmers could be improved by providing innovative financing schemes that address
problems of farmers who lack collateral. In this way farmers may be encouraged to
better access to formal credit and decrease their reliance on informal lenders. Thus
avoiding these and other constraints that hinder farmers ii-om access to credit, will
increase their farm productivity, improve their income and livelihood.
Key words: Formal Credit, Access, Rural Household, Challenges, Mareko Woreda
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Keywords
Formal Credit, Access, Rural Household, Challenges, Mareko Woreda