Rural Women Borrowers: Do They Consume the Loan or Invest Productively an Empirical Study in Wolaita Zone, Southern Ethiopia

Kolandavel Natarajan


Finance is an important instrument in rural development. Providing low-cost, efficient credit services and recovering the loans granted are fundamental functions in rural finance. Low repayment rate affects the liquidity of lenders and discourages them to extend further credit. Investigation of credit utilization is of great importance both for policy makers and the lending institutions. The objective of this study was to assess the status of credit utilization choice and socio-economic, demographic, psychological and institutional characteristics of rural women members of RuSACCOs (Rural Savings Credit Cooperatives) of Kindo Koysha Woreda in Wolaita Zone, Ethiopia. In the course of this study, primary data were collected from 96 sample women borrowers. The analysis was done using descriptive statistics such as mean, standard deviation and percentage. In addition, t-test and chi-square test were employed to compare groups which used the loan for productive purpose and those used for consumption purpose with respect to borrowers’ characteristics. The following categories of women borrowers were found to have higher tendency to use the loan for productive purposes rather than consumption purpose : Younger women, more educated, married, with lower dependency ratio, with higher household income and expenses, with higher livestock holding, with prior business engagement, having better access to road and market, who availed higher loan amount and having higher amount as savings from/in  RuSACCO, higher level of training, following weekly repayment rather than fortnightly or monthly and higher economic motivation. The study recommended that RuSACCOs need to follow up closely with women borrowers having the characteristics opposite of those aforementioned for ensuring productive use of credit and offer adequate training to them.

Keywords: Women Borrowers, Microcredit utilization, micro-finance, rural credit, RuSACCO

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