Factors Influencing Access to Credit for Rural People in Ethiopia

The lack of access to credit continues to be a major obstacle in developing countries, particularly in rural areas. Providing access to microcredit in rural regions can significantly improve the lives of the poor. This study examines the factors that affect the access to microcredit among rural individuals in the Bilate Zuria district of the Sidama region. A cross-sectional dataset was collected from 385 respondents selected through multiple stage sampling. The data were analyzed using both descriptive and inferential statistics in SPSS. The results of the analysis reveal that out of the 385 respondents, 34.5% (133) had access to credit. The logistic regression model shows that gender, marital status, collateral, lending procedures, group lending, high interest rates, distance, number of dependents, and the availability of limited microfinance institutions significantly affect the access to credit for rural residents in the study area. It is recommended that policymakers, the government, and other stakeholders emphasize and improve the accessibility of microcredit and increase its availability in rural areas.

technology, and maintaining proper nutrition and health.
According to Reyes (2012), rural development, particularly farm productivity, can be influenced by various factors, including access to credit. Agricultural credit plays a crucial role in accelerating agricultural modernization and economic development. It facilitates the flow of inputs, thus enhancing efficiency in farm production (Nouman et al., 2013). Access to credit has been shown to improve the production efficiency of small-scale farmers, thereby reducing rural poverty and food insecurity (Omonona et al., 2010). Farmers with access to credit are more likely to use optimal levels of inputs in their production compared to those who are credit-constrained. Therefore, improving access to credit has the potential to facilitate optimal input use and have a positive impact on farm productivity.
Determinants of access to finance in rural areas and empirical literature In discrete choice theory, the accessibility to microfinance loans can be explained by individuals having the choice to either apply for the loan or not. The decision to apply for the loan indicates that the applicant intends to maximize their utility through borrowing, taking into account the cost of interest (Taofeeki et al., 2016). For example, in an analysis of sectoral choices of farm households in two districts of Southern Ethiopia, Komicha (2008) found that the informal credit sector dominates rural financial markets. On the other hand, when examining the supply of microfinance loans, the credit rationing theory is applicable. Lenders may require collateral and increase interest rates if the demand for loans exceeds the available supply. Consequently, the lender may ration the loan, resulting in some applicants receiving the full loan amount or a portion thereof, while others may be disappointed by the rejection of their applications (Zeller, 1994). Komicha (2007) notes that credit rationing by formal financial institutions is often cited as a factor pushing farmers and small entrepreneurs towards informal credit sources. Various studies have investigated the factors affecting the demand for microcredit specifically among rural farmers.
Education: Education is considered an essential asset for communities as it enables them to access useful technologies, information, and acquire new skills to develop their rural on-and off-farm activities and improve their livelihoods. Several Gender: It is important to acknowledge that in many African societies, men and women are engaged in different economic activities, which can have varying implications for credit demand. Gender norms and associated roles can act as barriers to women's access to financial services, reinforcing traditional gender constructs and societal norms (Taylor and Boubakri, 2013). Women who deviate from traditional gender roles by pursuing independent and entrepreneurial paths in their economic endeavors may face resistance due to societal norms (Kiros A., 2012). Several studies have reported that women are less likely to seek credit from formal sources in Ethiopia (Komicha, 2007), Uganda (Mpuga, 2010), and Nigeria (Ajagbe et al., 2012). Surprisingly, a study from Ghana (Akudugu, 2012) found that men were less likely to seek loans.
Tigist.T (2019) found that social characteristics, including gender, have a positive effect on credit demand. However, a Qeios, CC-BY 4.0 · Article, June 27, 2023 policies and regulatory frameworks, access to infrastructure and support services, and environmental conditions all play a role. Based on the reviewed literature, this study categorizes the factors affecting access to credit in rural areas as socioeconomic, demographic, institutional, and other factors. Demographic factors include gender, age, and marital status.
Socio-economic factors include education level and income, as well as the assets that can be pledged as collateral.
Institutional factors encompass interest rates, lending procedures, operating costs, loan sizes, and group lending. Other factors are related to infrastructure and the regulatory environment. It is worth noting that the working environment of various microfinance institutions is often more favorable in urban areas where there are better infrastructural facilities and technologies available. This study was conducted in Bilate Zuria district, located in the Sidama Regional state of Ethiopia.

Sampling technique
The study utilized a multi-stage sampling technique. Initially, five kebeles were purposively selected. In the second stage, a proportionate sampling procedure was employed to determine the number of respondents to be selected from each kebele. Finally, respondents were randomly chosen using a balloting system to meet the predetermined proportion for each category. According to the district's records, each kebele is expected to have an average population of over 7,775 residents. Additionally, data from the microfinance institution indicated that there are 10 employees involved in arranging and managing microfinance activities in the district, all of whom were included in this study.

Sample of the study
To ensure generalizability to the entire population, various sampling designs and procedures were employed to obtain a truly representative sample. In this section, the sampling designs and procedures used for this study are presented. The sample size for the study was determined using the single population proportion cross-sectional formula, taking into account the assumptions made. For the study objectives, five kebeles were purposefully selected from the district.
Cochran ( Where n0 represents the sample size, Z 2 is the abscissa of the normal curve corresponding to a 95% confidence level (1.96), p is the estimated proportion of the attribute in the population (assumed to be 0.5 for maximum variability), q is the complement of p (i.e., 1-p), and e is the desired level of precision (0.05). By substituting the values into the formula, we obtain: In conclusion, the objective of the study was to identify the factors influencing access to credit in the rural area of Bilate Zuria District, Sidama Region, Ethiopia. Data was collected through self-administered questionnaires from selected rural kebeles, and analysis was conducted using both descriptive statistics and binary logit models in SPSS version 21. The study found that variables such as gender, marital status, collateral, lending procedure, group lending, high interest, distance, number of dependents, and the availability of limited microfinance institutions significantly affect the access to credit for rural residents in the study area.