Abstract:
The purpose of the study was to assess the effect of microfinance institutions on improving
household livelihood in Dire Enchini worada. The formal financial sector is underdeveloped,
state-owned, far from being competitive, and limited in terms of depth and breadth as measured
by the relevant financial sector development indicators. To address the limitations of the formal
banking sector and to help fill the financing gap, and improve the general livelihood of those at
the lower income group, the Government of Ethiopia introduced micro finance Programme in
1996. The study was conducted in rural areas to find out whether the microfinance institution
has improved the livelihood of its clients. Descriptive and explanatory research design as well as
mixed research approaches was used. The study used both primary and secondary data. The
primary data was collected from 200 samples of household clients and through questionnaire
and interview while secondary data like documents and reports were collected from different
institutions and webinars. Siiqee Bank and vision fund microfinance were considered for this
study. The independent variables for this study were the institutional related factors that affect
the client’s household livelihood. The data was analyzed through both descriptive and
econometrics model were used in order to analyze and interpret the collected data. The result of
the ordinal logistic regression model shows that out of the twelve explanatory variables five were
found to be significant and the tested variables were; sex, age ,edul, martal statuss,source
household income, household size, loan amaunt, housing condition, consumtion exp, saving,
apro.loan disbus time, laand size. Out of these age, edul, loan amount, famile size, and land size
are significant variables (5% significant level) that affect the client’s household livelihood. The
findings of the study indicate that the services provided by the microfinance institutions are
important for improvement of livelihood of client households. However, most of the clients have
challenged by institutions related factors to use the microfinance institutions loan service their
improve living standard. Among these factors the loan disbursement time, and the procedures
and preliminary requirements to obtain are significant factors affecting client’s household
livelihood improvement. The microfinance institutions were recommended that, to appreciate
and expand their service provision and address to remote area and microfinance institutions
were also advised to revise their regulatory framework which can be applicable for poor clients
as well as enable them to sustain.
