| Summary: | Technological change in agriculture in climate risk exposed developing countries requires for land-use intensification to feed the growing populations. The purpose of this article is to analyze the impact of participation in rural credit program on adoption of yield enhancing technology(inorganic fertilizer) using 1412 farm households surveyed in 2005/06, 2009/10, and 2014/15 cropping seasons from rural Tigrai, northern Ethiopia where smallholder farmers are financially constrained to purchase of improved agricultural technologies. The paper uses a double hurdle correlated random effect models with a control function approach to analyze the causal effect. Results show that controlling for the unobservable heterogeneity and the underlying determinants of fertilizer adoption and credit participation, for an increase of credit size by 1% from its mean, adoption rate of inorganic fertilizer has increased by 2.5% and supports the earlier hypothesis. The results imply that expanding and strengthening of rural credit program are crucial for smallholder agriculture and appeared to have a more robust impact on adoption of inorganic fertilizer.
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