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The Effect of Micro-Credit on Rural Households’ Income in the Case of Sinana District, Bale Zone, Oromia National Regional State, Ethiopia

Published in Economics (Volume 12, Issue 3)
Received: 20 January 2023     Accepted: 1 August 2023     Published: 8 September 2023
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Abstract

Rural credit is one of the tools used to combat poverty. Credit enables smallholder farmers to purchase agricultural tools and inputs when cash is scarce. Therefore, the main objective of this study was to investigate the effect of access to credit on household’s income. Both primary and secondary data were utilized in this study. Primary data was collected using semi-structured questionnaires. Descriptive, inferential, and econometric techniques were applied for data analysis. The mean comparison test revealed that on average the total annual income of smallholder farmers who received credit was better than non-beneficiaries by 26,878.46 Ethiopian Birr per annum. Heckman's two-stage econometric model was fitted. The Wald chi-square test of independency of access to credit and total household income per annum (rho = 0) was tested and showed that there is a strong relationship between the two equations at a 1% significance level. Landholdings, membership to cooperatives and education attainment of household head were among the common underlying factors which affect access to credit and the level of household income statistically significantly at less than 5% significance level. Therefore, government and non-governmental institutions must expand credit services and solve the problem of credit rationing facing smallholder farmers in Ethiopia.

Published in Economics (Volume 12, Issue 3)
DOI 10.11648/j.eco.20231203.13
Page(s) 105-111
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), 2023. Published by Science Publishing Group

Keywords

Credit, Effect, Income, Heckman Sample Selection, Ethiopia

References
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[4] Ayalew Sida (2014). The Role of Microfinance Institutions in Improving Livelihood; In Case of Oromia Credit and Saving Share Company in Agaro Town, Jimma Zone, European Journal of Business and Management, ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online), Vol. 6, No. 31, www.iiste.org.
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[10] MoFED (2021), Ministry of finance and Economic development, Macro-Fiscal Performance in Ethiopia and Recent Fiscal Policy Developments Addis Ababa, October 2021, No. 04/2021, https://www.mofed.gov.et/media/filer_public/44/33/44336247-02d5-499b-91f1-3427f8db22ed/final_macro-fiscal_performance.pdf
[11] MoPD, Ministry of Planning and Development (2022), Ethiopia Voluntary National Review 2022, Addis Ababa, Ethiopia https://hlpf.un.org/sites/default/files/vnrs/2022/VNR%202022%20Ethiopia%20Report_1.pdf
[12] Mosley P, Rock J (2004) Microfinance, labor markets and poverty in Africa: a study of six institutions. J Int Dev 16 (3): 467–500.
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[19] Taremwa, N. K., Macharia, I., Bett, E., Majiwa, E. (2021). Impact of agricultural credit access on agricultural productivity among maize and rice smallholder farmers in Rwanda. J. Agribus. Rural Dev., 1 (59), 39–58. http://dx.doi.org/10.17306/J.JARD.2021.01341
[20] Tegar Rismanuar Nuryitmawan (2020). Can Credit Recipient Household Escape from Poverty? Vol. I No. 3 - December 2020, E-ISSN: 2722-0842 | P-ISSN: 2721-8309, Available online at http://journal.pusbindiklatren.bappenas.go.id/
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  • APA Style

    Gemechu Mulatu. (2023). The Effect of Micro-Credit on Rural Households’ Income in the Case of Sinana District, Bale Zone, Oromia National Regional State, Ethiopia. Economics, 12(3), 105-111. https://doi.org/10.11648/j.eco.20231203.13

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    ACS Style

    Gemechu Mulatu. The Effect of Micro-Credit on Rural Households’ Income in the Case of Sinana District, Bale Zone, Oromia National Regional State, Ethiopia. Economics. 2023, 12(3), 105-111. doi: 10.11648/j.eco.20231203.13

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    AMA Style

    Gemechu Mulatu. The Effect of Micro-Credit on Rural Households’ Income in the Case of Sinana District, Bale Zone, Oromia National Regional State, Ethiopia. Economics. 2023;12(3):105-111. doi: 10.11648/j.eco.20231203.13

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  • @article{10.11648/j.eco.20231203.13,
      author = {Gemechu Mulatu},
      title = {The Effect of Micro-Credit on Rural Households’ Income in the Case of Sinana District, Bale Zone, Oromia National Regional State, Ethiopia},
      journal = {Economics},
      volume = {12},
      number = {3},
      pages = {105-111},
      doi = {10.11648/j.eco.20231203.13},
      url = {https://doi.org/10.11648/j.eco.20231203.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20231203.13},
      abstract = {Rural credit is one of the tools used to combat poverty. Credit enables smallholder farmers to purchase agricultural tools and inputs when cash is scarce. Therefore, the main objective of this study was to investigate the effect of access to credit on household’s income. Both primary and secondary data were utilized in this study. Primary data was collected using semi-structured questionnaires. Descriptive, inferential, and econometric techniques were applied for data analysis. The mean comparison test revealed that on average the total annual income of smallholder farmers who received credit was better than non-beneficiaries by 26,878.46 Ethiopian Birr per annum. Heckman's two-stage econometric model was fitted. The Wald chi-square test of independency of access to credit and total household income per annum (rho = 0) was tested and showed that there is a strong relationship between the two equations at a 1% significance level. Landholdings, membership to cooperatives and education attainment of household head were among the common underlying factors which affect access to credit and the level of household income statistically significantly at less than 5% significance level. Therefore, government and non-governmental institutions must expand credit services and solve the problem of credit rationing facing smallholder farmers in Ethiopia.},
     year = {2023}
    }
    

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    AB  - Rural credit is one of the tools used to combat poverty. Credit enables smallholder farmers to purchase agricultural tools and inputs when cash is scarce. Therefore, the main objective of this study was to investigate the effect of access to credit on household’s income. Both primary and secondary data were utilized in this study. Primary data was collected using semi-structured questionnaires. Descriptive, inferential, and econometric techniques were applied for data analysis. The mean comparison test revealed that on average the total annual income of smallholder farmers who received credit was better than non-beneficiaries by 26,878.46 Ethiopian Birr per annum. Heckman's two-stage econometric model was fitted. The Wald chi-square test of independency of access to credit and total household income per annum (rho = 0) was tested and showed that there is a strong relationship between the two equations at a 1% significance level. Landholdings, membership to cooperatives and education attainment of household head were among the common underlying factors which affect access to credit and the level of household income statistically significantly at less than 5% significance level. Therefore, government and non-governmental institutions must expand credit services and solve the problem of credit rationing facing smallholder farmers in Ethiopia.
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Author Information
  • College of Business and Economics, Wollega University, Nekemte, Ethiopia

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