Loan Repayment Status of Small Holder Farmers of Oromia Credit and Saving Share Company Clients: The Case From Adola Rede Woreda Guji Zone, Oromia, Ethiopia

Abstract

The major concern of this study is to assess the loan repayment status of small holder farmers of the OCSSCo clients. Based on the ground evidence of survey data results, small holder households of AdolaRede cannot able to implement improved agricultural activities with their own funds. They need credit from lending institutions to implement their agriculture and other livelihood activities. The main problem of farmers of the localities is the shortage of capital. The credit institution wouldn’t borrow money unless the credit taken by households is repaid. For the purpose of this study, primary data were collected from small holder farmers selected purposively in consultation with Oromia Credit and saving share company office of the district. A total of 154 households of OCSSCo clients were included in the final analysis. In addition, secondary data were collected from the district of OCSSCo, Journals, research findings and different reports. Descriptive statistics such as mean, tables, standard deviation and percentages were used for analyzing the data. To identify loan repayment status, two limit Tobit model was employed. In this regard, a total of fourteen explanatory variables were included in the empirical model of which five were significant. VIF and multicollinerity test and Breusch-Pagan/Cook-Weisberg test to detect Hetroscedasticity problem were employed. Distance from the main market, family size, credit amount, off-farm activities and cooperative membership were important in influencing the loan repayment status of small holders, either positively or negatively as evidenced by the model output.