Determinants and characteristics of household demand for credit: Evidence from Southern-Shoa, Ethiopia

The thesis investigates credit demand in rural Southern Ethiopia, based on a survey data, and its implication to food security in the short-run. The survey revealed that 45% of the households borrowed, primarily from informal lenders, using over half of the loan for consumption purposes. Probit estimation showed education, and residence in the highland increasing the probability of participation, while livestock asset, Food for Work (FFW) participation, and post-harvest season reduced it. For an OLS estimation, family size, farm expenditure, input credit, and post-harvest credit positively affected the amount borrowed, while FFW participation exhibited the opposite. The study demonstrated that rural households have high seasonal demand for consumption credit to attain food security, and still remain outside the formal financial system. The study recommends that policy makers link up with, and learn, from informal sectors to devise a viable financial/credit market that addresses the needs of the poor.