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Working Paper 247 - Credit constraints and farm productivity: Micro-level evidence from smallholder farmers in Ethiopia


Access to credit and other financial services by small-scale farmers has been considered as one promising way to reducing poverty, improving farm productivity, and easing a smooth transition from subsistence farming to large scale and agribusiness farming (Feder, Lau, Lin, & Luo, 1990; Sial & Carter, 1996; Carter & Olinto, 2003; Foltz, 2004). Indeed, in the shortrun, credit can help farmers increase their purchasing power to acquire necessary production inputs and finance their operating expenses while in the long run it can improve farmers’ ability to make profitable investments (Conning & Udry, 2007).

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