INSTITUTIONAL ARRANGEMENT FOR SOCIAL RISK MANAGEMENT AND ITS IMPACT ON SMALLHOLDERS’ COMMERCIALIZATION: THE CASE OF MIESO AND GUMBIBORDODE DISTRICTS OF WEST HARARGHE ZONE, OROMIA NATIONAL REGIONAL STATE, ETHIOPIA

Abstract

Social risks are a global phenomenon, having severe and direct implications for society, incurring large-scale influence, depending on the cultural, political, and economic context in which this phenomenon manifests itself. In recent years, a more holistic approach and society-wide arrangements of social risk management that go beyond social protection have become increasingly important to assist individuals and households to better manage multiple social risk factors. Given this, in the West Hararghe zone, pastoralists and agropastoralists’ often deal with social risks through the market, informal and public arrangements in the case of risks due to different reasons. However, the impact of the institutional arrangements for social risk management has not been well studied and documented. Hence, the major interest of this study was to identify institutional challenges in smallholders’ commercialization, to assess perceived sources of social risks, to analyze factors affecting the choice of institutional arrangements for social risk management; and to evaluate the impact of institutional arrangements for social risk management on smallholder’s commercialization the case of Mieso and Gumbi-Bordode districts of West Hararghe zone of Oromia Regional State. To meet these objectives a total of 382 sampled households were randomly selected from ten kebeles. Descriptive and inferential statistics of principal component analysis, multivariate regression, and propensity score matching (PSM) were employed to achieve these objectives. The result from principal component analysis reveals that service delivery, tenure security, price changes, insufficient market facilities, information, and channels were identified as institutional challenges that faced smallholder’s commercialization having high factor loadings. The result of the principal component analysis indicates social risks faced by households include loss of life and property, politico-social instability, displacement, and violent conflict. The result of multivariate regression inferred that family size, crop income, livestock income, and extension service, organizational experience, social cohesion, and trust significantly affected households choice of institutional arrangements. Estimates of the propensity score matching shows that households’ decision to participate in the output market decreased by 14%; while an increased in households’ income in crop and livestock production value of birr 214.80 and 2952.61 respectively among participants than nonparticipants of institutional arrangements for social risk management. The findings imply that institutional arrangements are crucial interventions in managing social risks and enhancing farm income. Thus, this study suggests a well-designed institution and institutional arraignments for ensuring tenure security and removal of the underlying sources of social risks and challenges thereby help the creation of consistent livestock commercialization and sustained social protection in the area.