ASSESSMENT OF INTEGRATED MILK VALUE CHAIN AND CREDIT SERVICE PARTICIPATION OF MILK PRODUCERS IN ETHIOPIA: THE CASE OF SULULTA AREA DAIRY VALUE CHAIN

Abstract

Identifying the main value chain actors and supply of credit services have been seen to have a significant effect on value chain adding activities of milk producers. Rural households’ participation in formal credit service is limited. This study assessed the structure, conduct and performance of milk market, factors influencing milk producers’ participation in formal credit markets and level of credit used to milk production and marketing. The study also assessed the milk value chain; to estimate the gross marketing margin, flow of the product, information among the major chain actors. This study employed stratified random sampling method and 120 household were selected from the six kebeles of the district. An interviewed was also conducted with 10 cooperatives, 2 milk processing industries, 2 financial institutions and 2 NGOs. The major actors participated in the milk value chain were producers, wholesalers, cooperatives, retailers, processors and consumers with the higher producers marketing margin of 61.3% for the channel that passes through cooperatives. The participation decision of the households in credit market and factors determining the level of credit utilization in milk production and marketing is analyzed using double hurdle model. The first stage result of double hurdle model reveals that education level, family size. Social role, land size, and distance to formal lending institution have significantly affected the credit p+articipation decision of the households. The second stage result shows that age, income crop, number of cows, and year of experience influence the level of credit utilized in milk production and marketing. Therefore, minimizing the barriers of access to credit use through nearby supply of the institutions and providing extension services regarding to the use of credit providing institutions need to be taken in to consideration to attract small scale producers to participate in formal credit market and to utilize it in milk production.