Abstract:
The study is carried out at Wolmera district of West Showa zone with the main objective to investigate participation in Buusaa Gonofaa microfinance and its impact in improving income of smallholder farm households. So as to achieve these objectives, the study undertook cross-sectional household survey collecting primary data from 326 sample rural households’ using simple random sampling method. The collected data was analyzed using descriptive statistics and econometric approaches. Binary Logit was used for sake of analyzing determinants of microfinance participation. Additionally, Propensity Score matching model was applied to estimate the impact of microfinance participation on rural household income in the study area. The descriptive analysis of the study revealed that Buusaa Gonofaa microfinance participation decision differ among participant 37.7% and non participant 62.3% on the basis of socio-economic characteristics such as age, marital status, education, family size and religion. On the other hand, the results of binary logit model indicated that marital status, education, non-farm participation, family size, frequency of extension contact, and cultivated land size affect microfinance participation decision of the household positively whereas age of household, religion( being Muslim), distance from the market, and estimated value of asset have negative and significant effect on the participation decision of rural households in the Buusaa Gonofaa microfinancing services. The study concluded that microfinance participation has positive and significant effect on rural household income. Therefore, it is advisable for Wolmera district leaders to expand both formal and informal education for rural households, creating awareness about importance of education will improve their skill to use farm inputs effectively as well as help to benefit from existing microfinance services appropriately and this can improve the income of the rural households.
