Determinants Of Microfinance Loan Utilization for Specified Purposes: Evidence from Selected Microfinance in Ethiopia
Keywords:
Microfinance, Microfinance institution, Loan, Loan utilization, Buusaa GonoofaaAbstract
Eradicating poverty is a major dimension focused on by the Ethiopian government as poverty was the existing enemy of the country. One of the leading mechanisms that help to shrink poverty at the farmers’ level is the provision of a microfinance loan. Even though the very essential issue, that has a contribution to the reduction of poverty is not only providing microfinance loan for the farmers’ but considering the time after loan provision is also another very important issue that enables to identify whether the farmers’ utilized loan for a specified purpose. The objective of this study was therefore to investigate the determinants of Microfinance loan utilization for a specified purpose by farmers clients based on data collected from 244 randomly selected farmers’ clients as well as data collected through key informant interview from manager and officer of Buusaa Gonoofaa microfinance institution in Oromia Regional State. Thus, this study employed a descriptive and more explanatory research design. The study used both primary and secondary data sources. Descriptive statistics and the Binary logit model were used for the analysis of the data. The results of the study indicate that clients’ utilization of microfinance loans for specified purposes was significantly influenced by factors such as level of education, amount of loan provided, delay of loan provision, and age of farmers’ clients. The study suggests that Microfinance institutions should pay appropriate attention to those key factors that influence clients’ utilization of microfinance loans to improve the living standard of farmers’ clients.
References
Lokesha and Iqbal Hawaldar Thonse. (2019). “Impact of factors on the utilization of agricultural credit of banks: an analysis from the borrowers’ perspective”. Banks and Bank Systems ISSN PRINT 1816-7403 ISSN ONLINE 1991-7074.
A.S. Idi, M.A. Damisa, B. Ahmed, O.I. Edekhegregor & Y.U. Oladimeji. (2019). MICRO-CREDIT UTILIZATION AND ITS IMPACT ON FAMERS MAIZE OUTPUT AND HOUSEHOLD FOOD SECURITY IN KADUNA STATE, NIGERIA . Journal of Agriculture and Environment Vol. 15 No. 1, ISSN: 1595-465X (Print) 2695-236X (Online) , 19-31 .
Abdelateif. H. Ibrahim and Sayed Ali. Fadul Elmola Zareba. (2015). Determinants of Loan Utilization and Repayment Behaviour among Small Farmers in North Kordofan of Sudan. Global Advanced Research Journal of Agricultural Science (ISSN: 2315-5094) Vol. 4(9), 533-648.
Abrha, Y. (2015). Loan Utilization and Repayment Practices of Rural Microfinance Clients: The Case of Wereilu District-Amhara Regional State of Ethiopia. Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.6, No.23.
Adeno, K. (2007). Outreach and Sustainability of the Amhara Credit and Saving Institution (ACSI), Ethiopia, Department of International Environment and Development studies Norwegian University of life sciences.
Akudugu, M. A. (2012). Estimation of the determinants of credit demand by farmers and supply by rural banks in Ghana’s upper East Region. Asian Journal of Agriculture and Rural Development, 2(393-2016-23992), 189-200.
Alexpandi, M., and Rameshkumar, S. (2014). Utilisation and Repayment of Agricultural Credit-The Case of Madurai District, Tamil Nadu. Journal of Rural Development, 33(2), 147-159.
Amanuel Ayele & Degye Goshu. (2018). Determinants of Microfinance Loan Utilization by Smallholder Farmers: The Case of Omo Microfinance in Lemo District of Hadiya Zone, Southern Ethiopia . Journal of Economics and Sustainable Development ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.9, No.13.
Atterton, J. (2007). The ‘strength of weak ties’: Social networking by business owners in the Highlands and Islands of Scotland. Sociologia Ruralis, 47(3), 228-245.
Berhe, A. (2010). Credit Utilization and Repayment Performance of members of Cooperatives in Alaje Woreda, T igray, Ethiopia:thesis Mekelle University.
Brooks, C. (2008). Introductory Econometrics for Finance . New York : Cambridge University Press.
Coleman. (1988). Social capital in the creation of human capital. American journal os sociology.
Conroy, J. (2002). Microfinance in Malaysia: Time to rebuild. The Foundation for Development Corporation. Brisbane. Australia.
Cronbach`s. (1951). Coeficient alpha and internal structure of test psychometric. 297-334.
D. Alio, J.J. Okiror, J.G. Agea, F.B. Matsiko and W. Ekere. (2017). Determinants of credit utilization among SACCO members in Soroti District, Uganda. African Journal of Rural Development, Vol. 2 (3) ISSN 2415-2838, 381-388.
D. Alio, J.J. Okiror , J.G. Agea, F.B. Matsiko & W. Ekere. (2017). Institutional determinants of credit utilization in the savings and credit cooperatives in Soroti district, Uganda. African Journal of Rural Development, 175-182.
D. ALIO, J.J. OKIROR , J.G. AGEA, F.B. MATSIKO and W. EKERE. (2017). Institutional determinants of credit utilization in the savings and credit cooperatives in Soroti district, Uganda. African Journal of Rural Development, Vol. 2 (2) ISSN 2415-2838, 175-182.
Danstun B. NGONYANI & Harun J. MAPESA. (2019). Implication of Credit Supervision Practices on Portfolio at risk of Microfinance Institutions in Tanzania. Journal of Economics and Financial Analysis, Vol:3, No:1, 27-45 .
Dasgupta, S.,& Dey, G. (2015). A study on Utilisation of Credit by Marginal Farmers in Nadia District of West Bengal. Economic Affairs, 60(2), 181-186.
David W. Hosmer, Borko Jovanovic and Stanley Lemeshow. (1989). Best Subsets Logistic Regression. International Biometric Society.
Emereole. (2004). Determinants of income and consumption expenditure of small holder farm households in Ikwuano LGA of Abia State, Nigeria. PhD dissewrtation, Department of Agricultural Economics, Michael Okpara University of Agriculture, Umudike, Nigeria.
Friedman, M. (1957). The permanent income In: A theory of the consumption function. Princeton University Press.
Gideon Danso-Abbeam, Mensah Tawiah Cobbina & Randy Appiah Antwi . (2016). AGRICULTURAL CREDIT UTILIZATION AMONG FARMERS IN BOLE DISTRICT OF NORTHERN REGION, GHANA . Ghana: RJOAS, 3(51).
Hair J.F, Black,W.C.Babin,B.J.,Andersan, R.E.and Tatham,R.L. (2010). multivarite data analysis. Prentice Hall Upper Saddle River,NJ.
Hussen, M. (2013). Loan provision by micro financing institutions for poverty reduction and its linkages with local economic development strategies in Ethiopia. European Journal of Business and Management, 5 (28), 32, 43.
Ingrid Matthaus-Maier and D.J Von Pischke. (2009). New Partnerships for Innovation in Microfinance. Berlin : Springer- Verlag .
Itana A.,Tsheay T. and Eshetu E. (2004). Governance and Ownership Structure of Microfinance Institutions in Ethiopia. Microfinance development Review, 3(2).
Jain, K. and Parveen S. (2014). Utilization of rural credit by tribal women self-help group members. . International Journal of Agricultural Extension 2, 127-132.
Karim, L. (2008). Demystifying micro-credit: the Grameen Bank, NGOs, and neoliberalism in Bangladesh. Cultural Dynamics, 20(1).
KAUSAR, A. (2013). Factors Affect Microcredit’s Demand in Pakistan . International Journal of Academic Research in Accounting, Finance and Management Sciences , 11–17 .
Kenneth Chepkwony, Hillary K. Bett, and Kenneth W. Sibiko. (2019). Determinants of Table Banking Loan Utilization among Micro AgriEnterprises Owners in Bomet County, Kenya. International Journal of Current Aspects, Volume 3 Issue II,ISSN 2616-6976 , 145-158.
Kothari, C. (2004). Research Methodology, Method & Technique .
Kyaw, Y. M. (2018). sources of Finance and Loan Utilization of Farmers (A Case Study of Myaung MYA Township). Yangon University of Economics Department of Commerce thesis submitted for master of banking and finance programme.
Ledgerwood, J. (1998). Microfinance handbook. An institutional and financial perspective , The World Bank.
LONGMA YANGER PONGEN,A. K. GODARA & S. P. SINGh. (2019). COOPERATIVE BANK LOAN UTILIZATION BEHAVIOR OF FARMERS IN NAGALAND. International Journal of Advanced Research in Management and Social Sciences Vol. 8 No. 7 ISSN: 2278-6236 .
Mayoux, L. (2001). Tackling the down side: Social capital, women’s empowerment and micro‐finance in Cameroon. Development and change, 32(3), 435-464.
Megha Sahu, J. S. Raghuwanshi & A.M. Jaulkar. (2017). A Study on Utilizationa Pattern and Diversion of Loan of District CO-Operative Agriculture and Rural Development Bank of Hoshangabad District of Madhya Pradesh. International Journal of Agricultural Science and Research (IJASR) ISSN(P): 2250-0057; ISSN(E): 2321-0087 Vol. 7, Issue 2, 405-412.
Nwaru, J. C., and Onuoha, R. E. (2010). Credit use and technical change in smallholder food crop production in Imo State of Nigeria. New York Science Journal, 3(11), 144-151.
Omari Malinza, A. (2009). Socio-economic factor Affecting Efficeint Utilization of Micro Credit Among Women in Morogoro Municipality. A Dissertation Submitted in Partial Fulfilment of the Requirements for the degree of Master of Arts in rural development of Sokoine University of Agriculture.Morogoro, Tanzania.
Orebiyi, J. S., Eze, C. C., Henri-Ukoha, A., Akubude, F. C., Ben-Chindo, F. C. and Ibitoye, S. J. (2012). Utilization and Determinants of Institutional Credit of the NACRDB by small Scale Farmers in Imo State, Nigeria. Agricultural journal, 7(5) , 360-364.
Osifo, A. A., & Daramola, A. G. . (2016). Analysis of Credit Utilization and the Determinants of Micro-Credit in Arable Crop Farming In Edo State, Nigeria. IOSR Journal of Agriculture and Veterinary Science (IOSR-JAVS), 9(7), 54-58.
OSIFO, Agharese Aikpehiomwan DARAMOLA, Adegboyega Gregory. (2016). Analysis of Credit Utilization and the Determinants of MicroCredit in Arable Crop Farming In Edo State, Nigeria. IOSR Journal of Agriculture and Veterinary Science (IOSR-JAVS) e-ISSN: 2319-2380, p-ISSN: 2319-2372. Volume 9, Issue 7 Ver. II, PP 54-58 .
Ram, d. B. (2016). Does Loan Size Matter for Productive Application? Evidence from Nepalese Micro-finance Institutions. R epositioning Volume 1 number. 1 ISSN 2467-950x(Print).
Ravindra Chavan, Amrutha T. Joshi, Suresh S. Patil and G.M. Hiremath. (2016). Utilization pattern of agriculture crop loan by farmers in India with special reference to Karnataka. Indian Journal of Economics and Development, Vol 4 (12) Indian Journal of Economics and Development, Vol 4 (12) ISSN (online): 2320-9836 ISSN (Print): 2320-9828.
Robinson, M. S. (2001). The Micro Finance Revolution. Indonesia: International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, NW, Washington, D.C. 20433 USA.
SAHARDID, A. O. (2019). MICROFINANCE SERVICE UTILIZATION AND ITS DETERMINANTS AMONG SMALLHOLDERS FARMERS IN DEGAHABOUR, SOMALI REGIONAL STATE. ADDIS ABABA UNIVERSITY MESTERS THESIS.
Taiwo, J. N. (2012). The impact of microfinance on welfare and poverty alleviation in Southwest Nigeria. Department of Banking and Finance School of Business College of Development Studies. Covenant University, Ota, Nigeria.
Tebeje, M., Gebeyehu, B. and Regasa, G. (2015). Socio-economic determinants of credit service utilization by smallholder households at Wolaita Zone, Ethiopia. Developing Country Studies 5 (11), 102-107.
tfe. (2012). research. sgas: yoni.
Udensi Lawrence Okoronkwo,Essien Joseph ,Alobari Collins M. and Naenwi M-Epbari O. . (2014). ACCESS AND UTILIZATION OF MICRO-LENDING SCHEME AMONG RURAL FARMERS IN CROSS RIVER STATE: POTENTIALS FOR SUSTAINABLE AGRICULTURAL DEVELOPMENT IN NIGERIA . Humanities and Social Sciences Letters, 72-80 .
Victor Ugbem Oboh & Ineye Douglas Ekpebu. (2011). Determinants of formal agricultural credit allocation to the farm sector by arable crop farmers in Benue State, Nigeria. African Journal of Agricultural Research Vol. 6(1), 181-185.
W.Creswell, J. (2014). research design. SAGE Publications, Inc.
Waller G. M. and Woodworth W. (2001). Microcredit as a grass‐roots policy for international development. Policy Studies Journal, 29(2),, 267-282.
Zerai, B., and Rani, L. (2012). TECHNICAL EFFICIENCY AND ITS DETERMINANTS OF MICRO FINANCE INSTITUTIONS IN ETHIOPIA: A STOCHASTIC FRONTIER APPROACH. African Journal of Accounting, Economics, Finance & Banking Research, 8(8).
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Husen Ahmed Kedir
This work is licensed under a Creative Commons Attribution 4.0 International License.
