Determinants of Income Generating Activities of Rural Households: Evidence from Ilu gelan woreda, west Shewa, Oromia Regional State, Ethiopia

Abstract

Income generating activity plays a decisive role for the reduction of poverty, food insecurity and to improve the welfare of rural communities. However, this study attempts to investigate determinants of income generating activities of rural households in Ilu Gelan Woreda, west Shewa, Oromia, Ethiopia. It helps to identify factors which are essential for the design of policies promoting alternative income generating activity strategies. The study utilized both primary and secondary data which are qualitative and quantitative in their nature. Through multistage sampling procedure, a total of 188 households were selected from the randomly selected five kebeles of Ilu Gelan Woreda. Data were collected using interview schedule, focus group discussions and field observations. The collected data were analyzed quantitatively and qualitatively. Descriptive and inferential statistics along with econometric model which is multinomial logit model have been employed to analyze the data. The econometric analysis (Multinomial logit model) result revealed that land holding size, educational status, livestock holding, sex, age, market distance, credit access, annual income, access to road, family sizes, household status, and etc. were the major determinants of income generating activities. Access to physical and human capital has a significant influence on total household income. The area owned the value of other assets possessed, as well as the number of livestock and family laborers positively influence household income. The possession of land also has a strong positive influence on the participation in crop production, whereas the possession of irrigated land develops to meet the food security enhancement and economic development. Diversification out of the agricultural sector is positively influenced by the wealth of the household, education, access to tarmac roads and participation in formal credit markets. The number of livestock owned and the access to social capital have a positive effect on the overall degree of diversification. However, poor infrastructural development, lack of working capital, absence of technical support, inadequate skill training and lack of awareness are constraints to income generating activities and negatively influenced income diversification of the study area. The study concludes that agricultural sector alone cannot be relied upon as the core activity for rural households and as a means of reducing poverty, achieving food security and improving 2 income in the study area. Thus, a comprehensive development plan that enhances successful income growth and diversification is found to be imperative and most urgent. Policies and actions directed towards improving income of the rural household communities should focus on expanding rural infrastructures, enhancing awareness creation activities and cooperation of stakeholders to bring sustainable income generations in the study area.