Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia

Simachew Dubale; Hassen Beshir

doi:doi:10.11648/j.aff.20200903.15

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Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia

Simachew Dubale, Hassen Beshir

Published in Agriculture, Forestry and Fisheries (Volume 9, Issue 3)

Received: 25 January 2020 Accepted: 25 May 2020 Published: 8 June 2020

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Abstract

Farm credit has been described as one of the pre-requisites for farmers to increase the agricultural production. However, the majority of Ethiopian population comprises small farmers, who cannot implement a technology without credit. Even though, there are attempts to solve these rural financial difficulties by government being collateral and extending microfinance institution, associated to different factors, a number of farmers are becoming defaulters and the lending institution faces a problem. This study focused on the analysis of factors affecting loan repayment performance of farmers in Simada District, South Gondor Zone and Amhara Regional State. In this study primary data collected from 150 randomly selected borrowers using structured questionnaire. Descriptive statistics such as mean, standard deviation, maximum, minimum and percentages were used to describe socio-economic and institutional characteristics of the respondents. The t-test and Chi-square test statistics were employed to compare defaulter and non-defaulter groups with respect to some explanatory variables. Finally, a Tobit regression model was employed to identify factors affecting loan repayment and intensity of loan recovery among smallholder farmer. Variance inflation factor and coefficient of contingency were calculated to detect multicollinearity and association among the continuous and discrete variables, respectively. A total of 14 explanatory variables were included in the empirical model and out of these, 8 were found to be statistically significant. Education level, Land holding size, total livestock holding, non farm income, expenditure on social festivals, number of years of experience in agricultural extension services, saving habit and source of credits were highly important in influencing loan repayment performance as evidenced by the model statistic. Therefore, the study suggests that improving the livestock sector, educating households, giving attention in promoting non-farm activities and saving habit, minimize traditional ceremonies are some of the important priority areas for the success of future intervention strategies aimed at the promotion technological transformation, increasing production and to minimize loan defaults..

Published in	Agriculture, Forestry and Fisheries (Volume 9, Issue 3)
DOI	10.11648/j.aff.20200903.15
Page(s)	75-85
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Loan Repayment, Defaulter, Non Defaulter, Descriptive Statistics, Tobit Model

References

[1]	Gebrehiwot T, Credit Utilization and Loan Repayment Performance of Agricultural Service Cooperatives in Enderta District, Tgiray. M. Sc. Thesis Presented To The Haramaya University, Ethiopia 2007.
[2]	Mohammad R., Factors Affecting on Loan Repayment Performance of Farmers in Khorasan-Razavi Province of Iran. A Paper Presented to The Conference on International Research on Food Security, Natural Resource Management And Rural Development. Mashhad, Iran 2009.
[3]	Simada District Cooperative Promotion Office, SWCPO Annual Report. Unpublished Document, Wogeda, 2014.
[4]	Amhara Credit and Saving Institution, ACSI 2014 Annual Report. Unpublished, Wogeda, 2014.
[5]	Simada District Agriculture Development Office, SDADO Annual Activity Report. Unpublished Document, Wogeda, 2014.
[6]	Israel, G. D., Sampling the Evidence of Extension Program Impact. Program Evaluation and Organizational Development, IFAS, University of Florida. PEOD-5, October 1992.
[7]	Greene, W. H., Econometric Analysis. Fourth Edition, Pretice Hall International, Inc. New York, 2000.
[8]	Johnston, J. And J. Dinardo, Econometrics Methods: Fourth Edition. The McGraw-Hill Companies, Inc, New York, 1997.
[9]	Maddala, G. S., Limited Dependent and Qualitative Variables in Econometrics. Cambridge University press, 1997.
[10]	Amemiya, T., Advanced Econometrics: T. J. Press Pad stow Ltd. Great Britain. 205p, 1984.
[11]	Goodwin, B. K., An Analysis of Factors Associated With Consumers’ Use Of Grocery Coupons. Journal of Agricultural and Resource Economics. 17: 110-120, 1992.
[12]	McDonald, J. and R. Moffit, The Use of Tobit Analysis. Review of Econometrics and Statistics. 62: 318-321, 1980.
[13]	Central Statistical Agency, National Report on Demographic Data for Development Ethiopia. CSA, Addis Ababa, Ethiopia, 2008.

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APA Style

Simachew Dubale, Hassen Beshir. (2020). Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia. Agriculture, Forestry and Fisheries, 9(3), 75-85. https://doi.org/10.11648/j.aff.20200903.15

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ACS Style

Simachew Dubale; Hassen Beshir. Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia. Agric. For. Fish. 2020, 9(3), 75-85. doi: 10.11648/j.aff.20200903.15

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AMA Style

Simachew Dubale, Hassen Beshir. Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia. Agric For Fish. 2020;9(3):75-85. doi: 10.11648/j.aff.20200903.15

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@article{10.11648/j.aff.20200903.15,
  author = {Simachew Dubale and Hassen Beshir},
  title = {Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia},
  journal = {Agriculture, Forestry and Fisheries},
  volume = {9},
  number = {3},
  pages = {75-85},
  doi = {10.11648/j.aff.20200903.15},
  url = {https://doi.org/10.11648/j.aff.20200903.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.aff.20200903.15},
  abstract = {Farm credit has been described as one of the pre-requisites for farmers to increase the agricultural production. However, the majority of Ethiopian population comprises small farmers, who cannot implement a technology without credit. Even though, there are attempts to solve these rural financial difficulties by government being collateral and extending microfinance institution, associated to different factors, a number of farmers are becoming defaulters and the lending institution faces a problem. This study focused on the analysis of factors affecting loan repayment performance of farmers in Simada District, South Gondor Zone and Amhara Regional State. In this study primary data collected from 150 randomly selected borrowers using structured questionnaire. Descriptive statistics such as mean, standard deviation, maximum, minimum and percentages were used to describe socio-economic and institutional characteristics of the respondents. The t-test and Chi-square test statistics were employed to compare defaulter and non-defaulter groups with respect to some explanatory variables. Finally, a Tobit regression model was employed to identify factors affecting loan repayment and intensity of loan recovery among smallholder farmer. Variance inflation factor and coefficient of contingency were calculated to detect multicollinearity and association among the continuous and discrete variables, respectively. A total of 14 explanatory variables were included in the empirical model and out of these, 8 were found to be statistically significant. Education level, Land holding size, total livestock holding, non farm income, expenditure on social festivals, number of years of experience in agricultural extension services, saving habit and source of credits were highly important in influencing loan repayment performance as evidenced by the model statistic. Therefore, the study suggests that improving the livestock sector, educating households, giving attention in promoting non-farm activities and saving habit, minimize traditional ceremonies are some of the important priority areas for the success of future intervention strategies aimed at the promotion technological transformation, increasing production and to minimize loan defaults..},
 year = {2020}
}

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TY  - JOUR
T1  - Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia
AU  - Simachew Dubale
AU  - Hassen Beshir
Y1  - 2020/06/08
PY  - 2020
N1  - https://doi.org/10.11648/j.aff.20200903.15
DO  - 10.11648/j.aff.20200903.15
T2  - Agriculture, Forestry and Fisheries
JF  - Agriculture, Forestry and Fisheries
JO  - Agriculture, Forestry and Fisheries
SP  - 75
EP  - 85
PB  - Science Publishing Group
SN  - 2328-5648
UR  - https://doi.org/10.11648/j.aff.20200903.15
AB  - Farm credit has been described as one of the pre-requisites for farmers to increase the agricultural production. However, the majority of Ethiopian population comprises small farmers, who cannot implement a technology without credit. Even though, there are attempts to solve these rural financial difficulties by government being collateral and extending microfinance institution, associated to different factors, a number of farmers are becoming defaulters and the lending institution faces a problem. This study focused on the analysis of factors affecting loan repayment performance of farmers in Simada District, South Gondor Zone and Amhara Regional State. In this study primary data collected from 150 randomly selected borrowers using structured questionnaire. Descriptive statistics such as mean, standard deviation, maximum, minimum and percentages were used to describe socio-economic and institutional characteristics of the respondents. The t-test and Chi-square test statistics were employed to compare defaulter and non-defaulter groups with respect to some explanatory variables. Finally, a Tobit regression model was employed to identify factors affecting loan repayment and intensity of loan recovery among smallholder farmer. Variance inflation factor and coefficient of contingency were calculated to detect multicollinearity and association among the continuous and discrete variables, respectively. A total of 14 explanatory variables were included in the empirical model and out of these, 8 were found to be statistically significant. Education level, Land holding size, total livestock holding, non farm income, expenditure on social festivals, number of years of experience in agricultural extension services, saving habit and source of credits were highly important in influencing loan repayment performance as evidenced by the model statistic. Therefore, the study suggests that improving the livestock sector, educating households, giving attention in promoting non-farm activities and saving habit, minimize traditional ceremonies are some of the important priority areas for the success of future intervention strategies aimed at the promotion technological transformation, increasing production and to minimize loan defaults..
VL  - 9
IS  - 3
ER  -

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Author Information

Simachew Dubale

Agricultural Economics, Debre Tabor University, Debre Tabor, Ethiopia
Hassen Beshir

Agricultural Economics, Wollo University, Wollo, Ethiopia

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APA Style

Simachew Dubale, Hassen Beshir. (2020). Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia. Agriculture, Forestry and Fisheries, 9(3), 75-85. https://doi.org/10.11648/j.aff.20200903.15

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ACS Style

Simachew Dubale; Hassen Beshir. Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia. Agric. For. Fish. 2020, 9(3), 75-85. doi: 10.11648/j.aff.20200903.15

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AMA Style

Simachew Dubale, Hassen Beshir. Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia. Agric For Fish. 2020;9(3):75-85. doi: 10.11648/j.aff.20200903.15

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@article{10.11648/j.aff.20200903.15,
  author = {Simachew Dubale and Hassen Beshir},
  title = {Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia},
  journal = {Agriculture, Forestry and Fisheries},
  volume = {9},
  number = {3},
  pages = {75-85},
  doi = {10.11648/j.aff.20200903.15},
  url = {https://doi.org/10.11648/j.aff.20200903.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.aff.20200903.15},
  abstract = {Farm credit has been described as one of the pre-requisites for farmers to increase the agricultural production. However, the majority of Ethiopian population comprises small farmers, who cannot implement a technology without credit. Even though, there are attempts to solve these rural financial difficulties by government being collateral and extending microfinance institution, associated to different factors, a number of farmers are becoming defaulters and the lending institution faces a problem. This study focused on the analysis of factors affecting loan repayment performance of farmers in Simada District, South Gondor Zone and Amhara Regional State. In this study primary data collected from 150 randomly selected borrowers using structured questionnaire. Descriptive statistics such as mean, standard deviation, maximum, minimum and percentages were used to describe socio-economic and institutional characteristics of the respondents. The t-test and Chi-square test statistics were employed to compare defaulter and non-defaulter groups with respect to some explanatory variables. Finally, a Tobit regression model was employed to identify factors affecting loan repayment and intensity of loan recovery among smallholder farmer. Variance inflation factor and coefficient of contingency were calculated to detect multicollinearity and association among the continuous and discrete variables, respectively. A total of 14 explanatory variables were included in the empirical model and out of these, 8 were found to be statistically significant. Education level, Land holding size, total livestock holding, non farm income, expenditure on social festivals, number of years of experience in agricultural extension services, saving habit and source of credits were highly important in influencing loan repayment performance as evidenced by the model statistic. Therefore, the study suggests that improving the livestock sector, educating households, giving attention in promoting non-farm activities and saving habit, minimize traditional ceremonies are some of the important priority areas for the success of future intervention strategies aimed at the promotion technological transformation, increasing production and to minimize loan defaults..},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Factors Affecting Loan Repayment Performance of Smallholder Farmers in Ethiopia
AU  - Simachew Dubale
AU  - Hassen Beshir
Y1  - 2020/06/08
PY  - 2020
N1  - https://doi.org/10.11648/j.aff.20200903.15
DO  - 10.11648/j.aff.20200903.15
T2  - Agriculture, Forestry and Fisheries
JF  - Agriculture, Forestry and Fisheries
JO  - Agriculture, Forestry and Fisheries
SP  - 75
EP  - 85
PB  - Science Publishing Group
SN  - 2328-5648
UR  - https://doi.org/10.11648/j.aff.20200903.15
AB  - Farm credit has been described as one of the pre-requisites for farmers to increase the agricultural production. However, the majority of Ethiopian population comprises small farmers, who cannot implement a technology without credit. Even though, there are attempts to solve these rural financial difficulties by government being collateral and extending microfinance institution, associated to different factors, a number of farmers are becoming defaulters and the lending institution faces a problem. This study focused on the analysis of factors affecting loan repayment performance of farmers in Simada District, South Gondor Zone and Amhara Regional State. In this study primary data collected from 150 randomly selected borrowers using structured questionnaire. Descriptive statistics such as mean, standard deviation, maximum, minimum and percentages were used to describe socio-economic and institutional characteristics of the respondents. The t-test and Chi-square test statistics were employed to compare defaulter and non-defaulter groups with respect to some explanatory variables. Finally, a Tobit regression model was employed to identify factors affecting loan repayment and intensity of loan recovery among smallholder farmer. Variance inflation factor and coefficient of contingency were calculated to detect multicollinearity and association among the continuous and discrete variables, respectively. A total of 14 explanatory variables were included in the empirical model and out of these, 8 were found to be statistically significant. Education level, Land holding size, total livestock holding, non farm income, expenditure on social festivals, number of years of experience in agricultural extension services, saving habit and source of credits were highly important in influencing loan repayment performance as evidenced by the model statistic. Therefore, the study suggests that improving the livestock sector, educating households, giving attention in promoting non-farm activities and saving habit, minimize traditional ceremonies are some of the important priority areas for the success of future intervention strategies aimed at the promotion technological transformation, increasing production and to minimize loan defaults..
VL  - 9
IS  - 3
ER  -

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