Value Chain Financing Instruments in Sidama Coffee Value Chain, Ethiopia

The study assessed the type of value chain financing instruments used and their respective characteristics in Sidama coffee value chain. The study uses data collected directly from Sidama coffee value chain actors through structured interview and questionnaire. Random and purposive   sampling methods were employed. The data was descriptively analyzed by using value chain analysis approach. Accordingly, there exists both direct and indirect value chain financing instruments in Sidama coffee value chain. A number of value chain financing instruments are employed in the chain, but the common instruments identified along the chain are categorized under product financing, receivables financing and financial enhancements. The instruments are characterized as informal and trusts-based and operate under mutual agreement between actors and are mostly the governance is conventional. Even though the conventional nature and poor infrastructure (both physical and financial) to reach each actor are challenges to the chain financing, the growing coffee market, existence of strong intervention, capitalization of cooperatives, the promising trend in the countries private owned financial institutions are found as the strongest side of the chain financing. Sidama coffee, value chain analysis, Value chain financing, Value chain financing instrument

Determinants of Coffee Growers’ Choice of Financing Options: The Case of Dale District, Sidama Zone, Ethiopia

The study assessed determinants of coffee farmers’ choices of financial options in Dale district. The study followed multistage simple random sampling method. Data collected from 162 coffee producing households in Dale district were used. Descriptive statistics for summarizing the socioeconomic and demographic characteristics of coffee producing households and multinomial logit model to analyze the determinants of farmers’ financing source choices were used. According to descriptive statistics finding, education level of the household head, total livestock owned by the household, total land holding and land covered by coffee,  average annual coffee supply of household , households past loan experience, membership to SACCOs, holding saving account and local administrative role of the household head shows statistically significant difference among households choice of financing options. The multinomial logit analysis result shows that, compared to financial institution (base category), household‘s livestock holding and households’ proximity to financial institution positively affectsthe use of equity financing, whereas house heads’ sex, holding a saving account, affiliation to local administration and past loan history negatively affects the use of equity financing. While holding a saving account, house head‘s age and affiliation to local administration negatively affects the choices of value chain financing. Households’ total livestock holding found to positively affect choice of value chain financing and other informal sources of finance than financial institutions. Conversely, holding a saving account, total land holding of the household and affiliation to a local administration are found to negatively affect the choice of other informal sources of financing than financial institutions. The study suggests that mounting of financial institutions; overcoming the bureaucracy and transparency problems of government owned financial institutions; provision of financial information and awareness creation for chain actors will improve the farmers’ financial choice decision. Keywords: Sidama coffee, financing sources choice, value chain financing, MNL, Dale district