Analysis of Credit Service Utilization by Rural Households: The Case of Humbo Woreda, Wolaita Zone, Ethiopia

Mesfin Tebeje Bogale Gebeyehu Guta Regasa


The objectives of the study were to analyze credit service utilization by rural households and to assess the prevailing challenges faced by microfinance institutions in the provision of credit service in the study area. In this study multi-stage sampling techniques were used to select 5 kebeles out of 42 kebeles of the study area and 150 sample households were randomly selected, of which 82 were credit users and 68 of them were non-users. Primary data were collected through structured and semi- structured interview schedule, Key Informant Interviews and Focus Group-Discussions. Various documents were reviewed to collect secondary data. To analyze the data, descriptive statistics such as mean, standard deviation, percentage, and frequency distribution were used to describe the institutional, socio-economic and demographic characteristics of the sample households. In addition, t-tests and chi-square tests were used to compare credit user and non-user sample groups with respect to the explanatory variables. Socio-economic factors such as income, possession of fixed asset, risk fearing, saving habit and opinion on group lending had showed significant relationship with credit service utilization. In addition to this, institutional factors like lending procedure, type of collateral required, and training and technical advice had showed significant relationship with credit service utilization. Therefore, credit service providers should give attention to factors that significantly influence credit service utilization by rural households, focus to institutional capacity building, implementing a working and effective follow-up system, and designing human resource development plan need to be implemented by the concerned authorities to improve the performance of microfinance service provision and credit service utilization.

Keywords: Credit Service, Rural Households, Credit Utilization, Microfinance

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