Access to credit is often viewed as a key to transforming semi-subsistence smallholder farmers into market-oriented producers. However, only a few studies have examined the factors that affect farmers’ decisions to allocate credit to farm activities in general and livestock production in particular.
This working paper employs a trivariate probit model with double selection to address the issue using data collected from smallholder farmers in Ethiopia. After using a two-step procedure to adjust for sample selection bias, gender of household head, land ownership and access to a livestock centred extension service are found to have a significant effect on farmers decision to use credit for livestock production.
The results showed female-headed households, farmers with a large plot of land and farmers that have access to livestock centred extension services are more likely to utilize credit for livestock production. However, since the effect of land ownership squared is negative, the effect of land ownership lessens for those who own a very large plot of land. The study highlights the fact that lending to female-household heads may lead to increased access to animal-sourced foods for rural households. Furthermore, the study shows that improving farmers’ access to credit should be supported by a focused extension service that addresses the special needs of female farmers.
Shiferaw, K., Gebremedhin, B. and Legesse, D. 2016. Factors determining household allocation of credit to livestock production in Ethiopia. LIVES Working Paper 21. Nairobi, Kenya: ILRI.