The Association between Access to Finance and Agricultural Productivity: Evidence from Southwest Oromia Region, Ethiopia

Improving agricultural productivity is an important policy direction where agriculture represents an important sector in the economy. However, the impact of access to finance on agricultural productivity is still controversial. The main objective of this study is to examine the association between accesses to credit and agricultural productivity using evidence from smallholder farmers in southwest Oromia region, Ethiopia. For this purpose, 4oo sample respondents were selected from three zones in southwest Oromia to collect data and chi-square test were used to see the association between access to finance and agricultural productivity. The study found that farmers who have accessed credit both from formal and informal sources have improved their productivity. However, the effect of access to informal credit was found to be stronger as compared to the effect of credit from formal financial sources.

Keywords: Access to finance, agricultural productivity, west Oromia