Abstract:
In Ethiopia microfinance institutions are becoming increasingly essential instruments in
reducing poverty. Improving the delivery of financial services to the poor helps the poor to
increase their disposable income, asset ownership, and cushion consumption during food
deficit periods. Accordingly, Oromia Credit and Saving Share Company has been providing
formal financial services for rural households in Oromia region for the last two decades.
Large number of studies examined the impact of microcredit on self-employment activities.
However, there is limited knowledge on the impact of Oromia Credit and Saving Share
Company credit program to what extent farm households using the program are better off
than those who do not use credit service and whether or not there exists variability in income
and food security status among farmers. This research was intended to fill these gaps in the
study area. The study was conducted in Kurfa Chele Woreda of East Hararghe Zone, with the
objective of assessing the impact of rural credit on household’s food security and income. The
main research question or counterfactual statement of the study was “what happened in
income and food security status to those who had participated in credit program, had not
taken part in the program?” A multistage sampling method was used to select 180 (82 Credit
users and the rest being non-user) sample households were interviewed. The data were
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analyzed using descriptive analysis, inferential statistical tools and an econometric propensity
score matching model. The result showed that, participation in the rural credit program was
affected by year of education, family size in AE, voluntary saving and participation in training
positively but, livestock holding and extension advice were found to affect participation in
rural credit program negatively. A matched comparison of calorie intake and annual income
outcomes were performed on the households who have shared similar pre-intervention
characteristics except the program and participation in the program had brought a more than
59% increase in annual income and 21% increase in the calorie intake of the participant
households. The sensitivity analysis also showed that all the matching estimators resulted in
statistically significant effects of the program on participating households. Therefore, for
effectiveness of the credit program the study finally recommended that crosslinking
households with year of education to those beneficiaries that have minimal understanding of
credit and saving, targeting households with greater number of family size, emphasizing on
the saving behavior of the program beneficiaries and finally enhancing the effectiveness of the
credit program through the management systems, ensuring that sufficient extension workers in
place were viewed to enjoy expected results from the program.
