Effects Of Microfinance Services On Rural Households Livelihoods: The Case Of Dire Enchini District, West Showa Zone, Oromia Reginal State, Ethiopia

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.