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Repayment rate of loans from semi-formal financial institutions among small-scale farmers in Ethiopia: Two-limit Tobit analysis

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  • Brehanu, Amare
  • Fufa, Bekabil

Abstract

Improving small-scale farmers' access to credit is one of the ways of achieving increased agricultural productivity to reduce poverty in Ethiopia. In this study, a two-limit Tobit model was used to analyze the determinants of repayment rate of loans from semi-formal financial institutions among small-scale farmers in Ethiopia. Small group lending, was found to be related to the loan repayment rate of the farmers positively and significantly. Furthermore, agro-ecology, total land holding size, total livestock holding, experience in the use of agricultural extension services, contact with extension agents and income from off-farm activities were found to affect the loan repayment rate of the households significantly. Consideration of these factors would reduce default rates on borrowed funds from semi-formal credit sources in the area.

Suggested Citation

  • Brehanu, Amare & Fufa, Bekabil, 2008. "Repayment rate of loans from semi-formal financial institutions among small-scale farmers in Ethiopia: Two-limit Tobit analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2221-2230, December.
    • Handle: RePEc:eee:soceco:v:37:y:2008:i:6:p:2221-2230
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    2. Ölkers, Tim & Liu, Shuang & Mußhoff, Oliver, 2023. "A typology of Malian farmers and their credit repayment performance - An unsupervised machine learning approach," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334547, Agricultural Economics Society - AES.
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    7. I Putu Astawa, 2017. "Non-Financial Performance Measures on Local Culture Basis in Assessing The Health of Microfinance Institutions," GATR Journals jfbr132, Global Academy of Training and Research (GATR) Enterprise.
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    11. Dorfleitner, G. & Just-Marx, S. & Priberny, C., 2017. "What drives the repayment of agricultural micro loans? Evidence from Nicaragua," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 89-100.
    12. Legesse, Befikadu A. & Jefferson-Moore, Kenrett & Thomas, Terrence, 2018. "Impacts of land tenure and property rights on reforestation intervention in Ethiopia," Land Use Policy, Elsevier, vol. 70(C), pages 494-499.
    13. Toyin Segun Ogunleye, 2017. "Financial Inclusion and the Role of Women in Nigeria," African Development Review, African Development Bank, vol. 29(2), pages 249-258, June.
    14. Kangogo, Daniel & Lagat, Job & Ithinji, Gicuru, 2013. "The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya," MPRA Paper 48624, University Library of Munich, Germany.
    15. Tiken Das & Pradyut Guha & Diganta Das, 2021. "Do the Heterogeneous Determinants of Repayment Affect Differently across Borrowers of Diverse Credit Sources in Rural Assam? A Double Hurdle Approach," Journal of Development Policy and Practice, , vol. 6(2), pages 188-209, July.
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