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Agricultural credit is one of the measures which is used by the governments to increase agricultural production and imporve the living standard of farmers in developing countries. The present study attempts to examine the factors affecting on the amount of formal credit received by the farmers and its impacts on production. A two stage indogenouse adjustment regression method was used to find the factors affecting on the amount of credit received by the farmers. Then the impact of credit on production was estimated. The results indicate that factors such as farm size, assets, education and regions have a significant impact on the amount of credit received by the farmers. The results also show that credit has a positive and significant effect on production. The Compured shadow price of credit shows that the marginal effect of credit is higher than its cost.