Credit plays an important role in agricultural development, and it is believed thatrnexpansion of credit program will have beneficial effects on agricultural production andrnimproving rural household's incomes. It is also a key to poverty alleviation, livelihoodrndiversification, and increase the business skill of rural households. In the study area, thernrural households dependent on subsistence farming, and their loan is mostly fromrninformal lender, thus access to formal credit remains low. There is a need to examine,rnfiuÂ·ther rural households access to formal credit, and determine the factors that influencernaccessibility of formal credit and identifY the major challenges of accessibility to credit.rnThe survey questioner distributed to 120 respondents, interview with key informant, andrnfocus group desiccation with farmers employed to data analysis. The major methods ofrnanalysis ill this study were both descriptive analysis and logistic regression model to meet onrnthe aforementioned objectives '. Out of 120 respondents 41 of them have access to creditrnduring the time of the study. Access to credit by rural household was limited & creditrnservice in the research area was not well served. Thus farmer's needs of credit led themrntn borrow from informal leaders. In this study a combination of demographic, econumicrnand institutional factors found to influence access to credit. The major challenges ofrnaccess for credit in the study area are lending group formation, credit collateral, highrninterest rate, limited number of MFI, lack of awareness and fear of risk are, restricted thernfanners Fom accessing forma l credit. It is recommended that accessibility to credit byrnsmall farmers could be improved by providing innovative financing schemes that addressrnproblems of farmers who lack collateral. In this way farmers may be encouraged tornbetter access to formal credit and decrease their reliance on informal lenders. Thusrnavoiding these and other constraints that hinder farmers ii-om access to credit, willrnincrease their farm productivity, improve their income and livelihood.rnKey words: Formal Credit, Access, Rural Household, Challenges, Mareko Woreda