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Global Scholars Journal of Economics Vol.1 (1), pp 1-12 September, 2013
©2013 Global Scholars Journals.


Full Length Research Paper

Determinants of microfinance service utilization: The case of Dire Dawa, Ethiopia

Endalew Wale, Endrias Geta* and Jema Haji

School of Agricultural Economics and Agribusiness, Haramaya University, Ethiopia.

*Corresponding author, E-mail:  Tel: +251916868202.

Accepted 10 September 2013





In Ethiopia, poverty is pervasive and it is argued that one of its causes is deprived access to credit and other microfinance services to be used for the purpose of working capital as well as investment. Thus, micro credit service was discovered as an area of priority in the fight against poverty and ensuring sustainable development. The objectives of this study were to identify the determinants of microfinance credit service utilization and the prevailing challenges and opportunities faced by the microfinance institutions in the provision of the service in Dire Dawa Administration. It was based on the data obtained from 160 respondents’ selected using multi-stage sampling technique as well as focus group discussions and key informant interviews. A binary logit model and descriptive statistics were used for the analysis of the data gathered. The result indicated that utilization of microfinance credit service was significantly influenced by factors such as area of residence, possession of fixed asset, sex of the respondent, educational level attained and distance of the respondents’ residence from microfinance service giving center. Therefore, developing gender sensitive strategies that promote the service provision among the female members of the community as well as  developing an incentive package targeting female members of the community, establishment of  satellite offices in the rural part of the administration,  focus to institutional capacity building, implementing a working and effective  follow-up system, and designing  human resource development plan need to be implemented by the concerned authorities to improve the performance of microfinance service proving and utilization.

Keywords: Dire Dawa, Credit, Logit, Microfinance.


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