Michael Tariku

Economic Impact of Credit Use on Smallholder Farmerss Michael Tariku

It has been reported in various studies that micro finance has very beneficial economic and social impacts. Others argue that it can be an instrument of defaults and stagnation rather than an instrument of progress. Therefore, the major concern of this study is to measure the impact of credit use on the farm income and the living standard of the small farmers, to identify the factors affecting credit use, and to investigate the pattern of credit use by smallholder farmers. Descriptive statistics such as mean, standard deviation and percentages were used for analysing the data. Moreover, inferential statistics of t-test and ?2 - test were employed to compare credit users and non-users with respect to the hypothesized and other related variables. A binary logit model is employed to examine factors affecting agricultural credit use. In this regard, a total of twelve explanatory variables were included in the empirical model of which five were significant, while Propensity Score Matching (PSM) method is employed to measure the impact of credit on the farm income of smallholders.