Agricultural credit repayment in Finoteselam town, northwestern Ethiopia

Abstract

This research was undertaken at Finoteselam town with the objective of estimating the parameters that determine agricultural credit repayment. Primary data from 200 households were collected through a questionnaire survey in 2006. Estimation results of the logit model revealed that variables such as higher family size, incurring unforeseen expenses, and taking loans for the purpose of oxen fattening decreased the probability of individual loan repayment within a group. On the other hand, variables such as participation in off farm employment activities and an increase in loan term increased the probability of individual loan repayment within a group lending scheme. It is therefore important that microfinance institutions focus on supervision of clients so as to avoid diversion of loans to consumption ends. Family planning, creating enabling conditions for insurance markets, and enhancing labour markets are areas of policy concerns that could further improve loan repayment performances. 

Key words: Agricultural credit, determinants, microfinance, ACSI, northwestern Ethiopia, Finoteselam