DETERMINANTES OF SMALLHOLDER FARMERS ACCESS TO CREDIT: THE CASE OF BASONAWORENA WOREDA, NORTH SHOWA ZONE, AMHARA REGION, ETHIOPIA

Abstract

One of the most crucial and leading factors constraining smallholder farmers’ development in developing countries like Ethiopia is limited access to financial capital and credit especially from the formal lending institutions. In Ethiopia, among other things, lack of finance is one of the fundamental problems hampering production, productivity and income of rural farm households. This study was aimed to examine the determinants of smallholder farmer’s access to credit: A Case of Basona Worena Woreda North Showa Zone in Amhara Region The study adopted exploratoryresearch design and it attempts to examine the various factors (Institutional factors, demographic factor, socio-economic factors, geographical factors that can affect smallholder farmer’s access to credit in Basona Worena Woreda North Showa Zone in Amhara region. A sample of 418 farming households were participated in this study and Stata13statistical software was used to process the collected data. The logistic regression analysisused to investigate the relationships between the factors affecting access to credit indicate that sex of the household head, age of the household head, household size, land size, distance to nearest market, primary occupation of the farming household heads, cooperative membership, saving habit and extension contact were found statistically significant in explaining farming household access to credit. Based on the finding the study recommend that credit institutions should reduce the period for lending procedure and the costs involved in processing loan. Awareness creation should be made for farmers at a regular basis concerning the potential benefits of accessing micro credit and lending institutions should reduce the costs involved in processing loan and interest rate levied on the amount lent.