The study was conducted in Durbete district on the effect of financial institutions on small holder farmer’s productivity. The general objective of this study was to assess the effect of financial institutions on small holder farmer’s productivity. In our prevalent and deprived agrarian sector, sufficient credit provision is a serious problem to implant technological advancements and achieve technical efficiency, moreover the establishment and expansion of financial service is also one of the instruments to break the vicious circle of poverty. Lack of agricultural credit has become a bottle neck of development of agricultural sectors. The objective of this paper is to assess the effects of financial institutions on smallholder farmer’s productivity and to make some recommendation. Following most recent literature, the paper investigates the effects of financial institutions on small holder farmer’s productivity by using descriptive statistics. Results show that age, agricultural credit, education, wealth status and land has significant positive impact on crop productivity. The finding of this research indicates that financial services to the poor farmers would improve their livelihoods enabling them to purchase agricultural inputs. The study recommend that institutional credit should be provided fertilizer loan and improved seed loan appears to be the possible areas of extending credit. Finally, agricultural policy should give sufficient attention to rural credit policies.
Micro Finance Institutions, Smallholder Farmers, Productivity
