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Agricultural credit market participation in Finoteselam town, Ethiopia

Agricultural credit market participation in Finoteselam town, Ethiopia Purpose – The purpose of this paper is to identify the proportion of farmers with constrained and unconstrained participation in the agricultural credit market and estimate the parameters that determine agricultural credit market participation in Finoteselam town, Ethiopia. Design/methodology/approach – The study followed cross‐sectional study design where primary data were collected from 210 households through a questionnaire survey in Finoteselam town, north western Ethiopia. A combination of purposive and random sampling techniques was employed. Descriptive statistics were used to identify the proportion of farmers with different levels of participation in the agricultural credit market. The bivariate probit model was estimated to identify the parameters that determine smallholder credit market participation. Findings – The study revealed that 48 percent of smallholder farmers are constrained non‐participating (i.e. rationed out) from the agricultural credit market due to lack of access to the service, 44.8 percent of them are constrained participating, 2.4 percent unconstrained participating and 4.8 percent of them are unconstrained non‐participating. Estimation results of the bivariate probit model indicated that variables such as high dependency burden, large landholding size, household's labor endowment, participation in off‐farm employment activities and incurring unforeseen expenses increased the probability of households to participate in agricultural credit markets. On the other hand, village dummy variable, old age of household head and borrowing from other sources decreased the probability of households participating in the agricultural credit market. Practical implications – The findings raise policy concerns to devise a mechanism for creating a functioning rural insurance market, improve the labor market for encouraging off‐farm employment activities, devise wealth‐creating schemes and address the credit need of those smallholder farmers who are still rationed out from the agricultural credit market. Originality/value – Little has been done on the subject of agricultural credit market participation in Ethiopia. Hence, this research will add to the thin literature on the subject. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Agribusiness in Developing and Emerging Economies Emerald Publishing

Agricultural credit market participation in Finoteselam town, Ethiopia

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
2044-0839
DOI
10.1108/20440831111131514
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to identify the proportion of farmers with constrained and unconstrained participation in the agricultural credit market and estimate the parameters that determine agricultural credit market participation in Finoteselam town, Ethiopia. Design/methodology/approach – The study followed cross‐sectional study design where primary data were collected from 210 households through a questionnaire survey in Finoteselam town, north western Ethiopia. A combination of purposive and random sampling techniques was employed. Descriptive statistics were used to identify the proportion of farmers with different levels of participation in the agricultural credit market. The bivariate probit model was estimated to identify the parameters that determine smallholder credit market participation. Findings – The study revealed that 48 percent of smallholder farmers are constrained non‐participating (i.e. rationed out) from the agricultural credit market due to lack of access to the service, 44.8 percent of them are constrained participating, 2.4 percent unconstrained participating and 4.8 percent of them are unconstrained non‐participating. Estimation results of the bivariate probit model indicated that variables such as high dependency burden, large landholding size, household's labor endowment, participation in off‐farm employment activities and incurring unforeseen expenses increased the probability of households to participate in agricultural credit markets. On the other hand, village dummy variable, old age of household head and borrowing from other sources decreased the probability of households participating in the agricultural credit market. Practical implications – The findings raise policy concerns to devise a mechanism for creating a functioning rural insurance market, improve the labor market for encouraging off‐farm employment activities, devise wealth‐creating schemes and address the credit need of those smallholder farmers who are still rationed out from the agricultural credit market. Originality/value – Little has been done on the subject of agricultural credit market participation in Ethiopia. Hence, this research will add to the thin literature on the subject.

Journal

Journal of Agribusiness in Developing and Emerging EconomiesEmerald Publishing

Published: Jun 3, 2011

Keywords: Agriculture; Credit; Ethiopia

References