ACCESSING CREDIT FROM FINANCIAL INSTITUTIONS TO RURAL HOUSEHOLDS IN ETHIOPIA: THE CASE OF SEBETA ADMINISTRATION

Abstract

Abstract This study has aimed to identify rural households’ access to credit in Sebeta City Administration. A total of 190 households, 24% of them female headed households, were included in the study. Logistic regression was applied in order to identify factors affecting credit accessibility to rural households. . The study result revealed that only 15% of households included in the survey had access to formal credit service while 60% of them had indicated that they have a need for such service. Many of them had stated that they were reluctant to apply for credit for two main reasons: amount of loan offered by the institutions being not sufficient for their needs and lack of awareness about the process and procedures to apply for the loan. The result of the survey indicates that four continuous variables, age, aging, family size and number of livestock significantly affect access to loan availability. Similarly, four categorical variables, namely access to extension package, sex of the household head, ownership of irrigable land and group membership significantly affect rural household’s access to formal credit. However, education level, income and land size don’t have significant impact on credit access. Thus, 57.3% of the households included in the study were credit constrained households.