In Ethiopia, among other things, lack of finance is one of the fundamental problems hampering production, productivity and income of rural farm households. Since access to institutional finance is very limited, the majority of the coffee farmers are forced to search financial services through informal channels. This study was aimed at analyzing coffee value chain finance in Bodji Dirmeji District, Ethiopia with specific objectives of mapping out the coffee value chain finance and Sources of Credit for Coffee Value Chain in the study area. Two stage sampling method was employed to select 168 coffee farmers. Coffee value chain actors include producers, local collectors/assemblers suppliers, processors, service providers, exporters, wholesalers and retailers. The study reveals that the sources of credit to coffee farmers comprised of both the formal and informal sources. Formal sources included the Commercial Bank of Ethiopia (CBE) Oromia Credit and Saving Share Company (OCSSCO) and Cooperatives. Informal credit sources on the other hand comprised coffee traders. The output from the study indicates that 64 (38.1%) of the sampled farm households were formal credit users, whereas the remaining 104 (61.9%) of the sampled farm households were having fixed price forward contracting with traders. Therefore, policy aimed to accelerate agricultural development in the area could be successful if these problems are taken into consideration.
Key Words: Value chain finance, Formal credit, Forward selling, Price risk/benefit sharing