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Global Journal of Agricultural Economics and Econometrics

Full Length Research Paper 

Financial constraints and entrepreneurial activity choice among clients of micro finance institutions in Jimma area 

Misginaw Tamirat 

Department of Agricultural Economics, Jimma University College of Agriculture and Veterinary Medicine,

P. O. Box 307, Jimma Ethiopia.

E-mail: misgina.tamirat@gmail.com, or misginaw.tamirat@ju.edu.et 

Accepted 30 July, 2013 

The research is intended to assess the small holder entrepreneurs’ enterprise choices under financial constraint. Adapting economic model of household-production interactions, results from a survey of 140 smallholders was used on multinomial logit regression techniques. The paper makes the case that the access to finance has limited effect on the choice of entrepreneurial activity than individual differences did. It was also found that majority of the problems the entrepreneurs faced have no significant association with access to credit rather with macroeconomic and institutional factors. There has also been strong association of human capital, physical and social capital with entrepreneurial activity choice, implying enhancement of smallholder’s entrepreneurship need to take into account other socio-economic factors besides the access to credit. The activity analysis has also showed that there is an out-flock of entrepreneurs from agriculture to non agricultural sector which would have a critical implication on the country’s endeavor to food security. Generally, the study reveals sets of key variables relevant to the smallholders’ entrepreneurial activity choice, and provides an evaluation of intensity of the effects of the variables. The paper concludes by bringing these critical insights to bear on possibilities for designing microfinance programs that would help flourish smallholder entrepreneurship which would gear towards realization of the country’s long run development plan. 

Key words: Entrepreneurship, activity choice, micro finance.