The impact of credit on the technical efficiency of food crop producing smallholder farmers in Ethiopia

M.G. Koricho, M.H. Ahmed*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Purpose
This study examines the impact of access to credit on the technical efficiency (TE) of maize-producing smallholder farmers in Ethiopia and explores factors determining credit utilization.

Design/methodology/approach
The study relies on nationally representative data collected in 2015/2016. The data are analyzed by combining the Propensity Score Matching technique with a stochastic frontier model that corrects selectivity bias arising from unobserved variables.

Findings
The result shows that credit service improves TE and helps smallholder farmers to achieve the maximum possible output level from a given set of inputs used.

Originality/value
To the best of author’s knowledge, no study has yet measured the impact of access to credit on TE by controlling for both observed and unobserved heterogeneities. Existing research relied on a single production frontier model, assuming that credit users and non-users have similar production characteristics or ignored selection bias due to observable and unobservable characteristics.
Original languageEnglish
Number of pages10
JournalAgricultural Finance Review
DOIs
Publication statusE-pub ahead of print - 28 Oct 2021

Keywords

  • Credit utilization
  • Selection bias
  • Matching
  • Stochastic production frontier
  • Technical efficiency
  • Ethiopia
  • D13
  • D24
  • Q14
  • PRODUCTIVITY
  • DETERMINANTS
  • AGRICULTURE
  • TECHNOLOGY
  • GHANA

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