Impact of agricultural credit on maize productivity among smallholder farmers in Hababo Guduru district, Oromia, Ethiopia

Abstract

Agricultural credit is needed to buy farm inputs such as seed, fertilizer, chemicals, hired non-family farm labor, and
to finance farm maintenance costs.In Ethiopia, limited access to agricultural credit facilities is one of the major factors
affecting agricultural productivity. We evaluate the impact of credit on maize productivity among smallholder farmers using a cross-sectional survey data from 260 households, 120 who have access to credit and 140 who do not have access to credit, and using propensity score matching method. We find that access to credit increasesmaize productivity by 26.6% via increasing the use of improved maize seed, fertilizer and hired labor, by 37.4%, 47.8% and 33.6%respectively. The result implies that credit enables smallholder farmers to overcome capital constraints and purchase superior quality and high yielding variety seeds, fertilizers and hire labor to enhance agricultural productivity. Policy makers and financial institutions should address constraints of credit and increase credit outreach to enhance agricultural productivity and achieve food security of smallholder farmers.