Abstract:
Small scale farmers in Ethiopia cannot apply improved agricultural technologies out of their own funds. This farmers need credit to apply the new technologies. On the other hand, the achievement of credit is controversial. So, studying the impact of credit on gross farm income and the livelihood of the society is important. It has been reported in various studies that micro finance has very beneficial economic and social impacts. Therefore, the major concern of this study is to review the impact of credit on gross farm income and the living standard of the small scale farmers. For the purpose of this study primary data were collected from purposively selected three PAs. A total of 160 households comprising 104 credit users and 56 non-users were included in the final analysis. In addition, secondary data were collected from relevant organizations and pertinent documents. Descriptive statistics such as mean, standard deviation and percentages were used for analyzing the data. Fertility status of the soil, total household expenditure, and frequency of contact of DA were highly important in influencing agricultural credit use as evidenced by the model output. The other critical variables include farm size and gross farm income. While cultivated area, number of draft oxen, credit and total livestock unit were highly important factors of production contributing to gross farm income. The other critical variables include family labour and frequency of contact of DA. The findings suggest the following set of policy recommendation. Formal and informal education, equal distribution asset (Land) and frequency of DA Has significant impact on credit use and welfare of house hold therefore the government should focus on the above factor.
