Conference name, dates, place

International Conference on Contemporary Development Issues in Ethiopia, August 16-18, 2001, Kalamazoo, Michigan

Document Type

Paper

Presentation Date

8-2001

Abstract

Agriculture in Ethiopia is the most important sector, as measured by its contribution to total output, employment, and export earnings. Small –scale peasant farming is the most predominant mode of cultivation, and it is the peasant farmer who has suffered the most from the lack of capital, lack of technology and deterioration of the soil. Although agriculture remains the backbone of the Ethiopian economy, production has been declining since the 1960s while the rate of population growth has been steadily rising. Thus Ethiopia, which could once feed itself, has been importing food on a large scale. The fall in agricultural output could be attributed to low productivity, archaic land tenure system, weak infrastructure, and the low level of technology, political instability, recurrent drought, and above all wrong- headed economic Policy. Particularly note worthy is the lack of resources directed at increasing productivity or provision of adequate rural finance. A significant example of neglect is the woefully inadequate amount of agricultural credit available to the peasant sector and the total neglect of encouraging savings mobilization. The result is that 70% - 80% of Ethiopian peasant farmers do not receive institutional credit today. That means the majority either do not borrow or depend on the private money lender. Since 80 to 90 percent of food production is from the small farm sector, credit, along with improved technology must be provided in a form that can serve these farmers. They in turn, must increase production to keep pace with the productivity of urban population This requires the application of expensive technology. While it is widely recognized that the poor need credit for basic consumption and to finance working capital, unfortunately, they are often discriminated by commercial financial institutions because they do not have the necessary collateral and are considered “high risk” Contrary to common belief , small farmers have demonstrated their ability not only to pay high rates of interest but also to repay on time. What is needed is vigorous competition in the provision of credit through multiplicity of lenders, both public and private. The lack of or denial of capital to peasants and poor farmers by financial institutions is denying the majority of producers full participation within the productive sector. In loan decisions, the emphasis should be the productive capacity of the farmer borrower rather than on collateral.

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