Determining the Effects of Institutional Credit on Small Holder Farmer’s Productivity: The Case of Tembaro Woreda

The Ethiopian agriculture is characterized by its very low productivity with grain yields. The establishment and expansion of financial service is also one of the instruments to break the vicious circle of poverty-Government of less developed countries has fragmentally practiced the policy of providing cheap credit sector through financial intermediaries. This cheap credit, it was hoped, would lower the dependence on the rural/money lenders. Sufficient credit provision is a serious problem to implant technological advancements and achieve technical efficiency, moreover the establishment and expansion of financial service is also one of the instruments to break the vicious circle of poverty. The objective of this paper was to assess the effects of institutional credit on smallholder farmer’s productivity. A total of 120 respondents were used to attain the objective of the study and OLS method was used to analyse the econometric data Results show that age, agricultural credit, education, wealth status and land has significant positive impact on crop productivity. The finding of this research indicates that The productivity of those peoples who were using credit shows a positive change. Various variables were expected to affect small householders’ productivity. The variables were age, land, marital status, wealth status, access to credit and educational status. Among the factors the OLS result reveals that all the factors such as age, land, marital status, wealth status, access to credit and educational status were some of the factors which have a positive effect on the small house holder’s productivity. The study recommended that Since access to credit has a positive relation with the productivity of small household, the concerned bodies should facilitate credit access to peoples in the area. Education is a base for all things. As the peoples educated more the production and productivity of crops will increase. Therefore, the woreda`s administrator and other concerned bodies should focus and give attention to increase the quality of education in the area. Keywords: Credit, Productivity DOI: 10.7176/JESD/10-21-04 Publication date: November 30th 201