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Agricultural credit market participation in Finoteselam town, Ethiopia


  • Maru Shete
  • Roberto J. Garcia


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.

Suggested Citation

  • Maru Shete & Roberto J. Garcia, 2011. "Agricultural credit market participation in Finoteselam town, Ethiopia," Journal of Agribusiness in Developing and Emerging Economies, Emerald Group Publishing Limited, vol. 1(1), pages 55-74, June.
  • Handle: RePEc:eme:jadeep:v:1:y:2011:i:1:p:55-74
    DOI: 10.1108/20440831111131514

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    Cited by:

    1. Tweneboah Asante, Isaac & K. Dziwornu, Raymond & Awunyo-Vitor, Dadson, 2020. "Hunger Project Credit Facility and Maize Productivity in Ghana," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 10(01), January.
    2. Tchékpo Fortuné OGOUVIDE & Ygué Patrice ADEGBOLA & Afio ZANNOU & Gauthier BIAOU, 2022. "Determinants of Farmer’s Participation in Formal Microcredit Markets in Benin," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 13(2), pages 77-95, December.

    More about this item


    Agriculture; Credit; Ethiopia;
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