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Repayment rate of loans from semi-formal financial institutions among small-scale farmers in Ethiopia: Two-limit Tobit analysis

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  • Brehanu, Amare
  • Fufa, Bekabil

Abstract

Improving small-scale farmers' access to credit is one of the ways of achieving increased agricultural productivity to reduce poverty in Ethiopia. In this study, a two-limit Tobit model was used to analyze the determinants of repayment rate of loans from semi-formal financial institutions among small-scale farmers in Ethiopia. Small group lending, was found to be related to the loan repayment rate of the farmers positively and significantly. Furthermore, agro-ecology, total land holding size, total livestock holding, experience in the use of agricultural extension services, contact with extension agents and income from off-farm activities were found to affect the loan repayment rate of the households significantly. Consideration of these factors would reduce default rates on borrowed funds from semi-formal credit sources in the area.

Suggested Citation

  • Brehanu, Amare & Fufa, Bekabil, 2008. "Repayment rate of loans from semi-formal financial institutions among small-scale farmers in Ethiopia: Two-limit Tobit analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2221-2230, December.
  • Handle: RePEc:eee:soceco:v:37:y:2008:i:6:p:2221-2230
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    References listed on IDEAS

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    1. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
    2. Huppi, Monika & Feder, Gershon, 1990. "The Role of Groups and Credit Cooperatives in Rural Lending," World Bank Research Observer, World Bank Group, vol. 5(2), pages 187-204, July.
    3. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    4. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-321, May.
    5. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
    6. Adams, Dale W. & Vogel, Robert C., 1986. "Rural financial markets in low-income countries: Recent controversies and lessons," World Development, Elsevier, vol. 14(4), pages 477-487, April.
    7. Diagne, Aliou, 1999. "Determinants of household access to and participation in formal and informal credit markets in Malawi," FCND discussion papers 67, International Food Policy Research Institute (IFPRI).
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    Cited by:

    1. Suraya Hanim Mokhtar & Gilbert Nartea & Christopher Gan, 2012. "Determinants of microcredit loans repayment problem among microfinance borrowers in Malaysia," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(7), pages 33-45, December.
    2. D'Espallier, Bert & Guérin, Isabelle & Mersland, Roy, 2011. "Women and Repayment in Microfinance: A Global Analysis," World Development, Elsevier, vol. 39(5), pages 758-772, May.
    3. Song, Nianfu & Aguilar, Francisco X. & Shifley, Stephen R. & Goerndt, Michael E., 2012. "Factors affecting wood energy consumption by U.S. households," Energy Economics, Elsevier, vol. 34(2), pages 389-397.
    4. Dorfleitner, G. & Just-Marx, S. & Priberny, C., 2017. "What drives the repayment of agricultural micro loans? Evidence from Nicaragua," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 89-100.
    5. repec:bla:afrdev:v:29:y:2017:i:2:p:249-258 is not listed on IDEAS
    6. Kangogo, Daniel & Lagat, Job & Ithinji, Gicuru, 2013. "The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya," MPRA Paper 48624, University Library of Munich, Germany.
    7. Ellis Kofi, Akwaa-Sekyi & Portia, Bosompra, 2015. "Determinants of business loan default in Ghana," MPRA Paper 71961, University Library of Munich, Germany.

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