Determinants of Formal Credit Repayment Performance by Smallholder Farmers in Dale Sedi Woreda

Abstract

Ethiopian economy is mainly depends on agriculture which provides employment for 85% of the labor force and accounts for a little over 50 per cent of the GDP regardless of its low production potential. To bolster the sector, improvement of agricultural technologies with sufficient loan provision is advisable. However, smallholders are reluctant to repay again. This study therefore attempted to investigate the factors that affect smallholder farmers’ formal credit repayment performance in Dale Sadie woreda. To do so, a microeconomic based analysis with multistage sampling technique (inclusion of both purposive and systematic random sampling) was used to determine the relevant sample size of the study. To analyze the data, both descriptive and inferential (Tobit regression) methods were utilized. The result of the study revealed that respondents’ age, educational level, smallholder farmers of being protestant, orthodox, and Muslim religious followers, and loan repayment ratio were significantly and positively affect repayment performance, Moreover, farm households’ family size and marital status of being widowed were statistically significant and has a negative impact on repayment performance. Therefore, responsible bodies should be involved to increase the repayment performance of small holder farmers.

Keywords: repayment performance, defaulters, Dale Sadie woreda, kebele

DOI: 10.7176/JESD/12-17-01

Publication date:September 30^th 2021