INCOME DIVERSIFICATION AND ITS DETERMINANTS AMONG RURAL FARM HOUSEHOLDS: THE CASE OF HARAMAYA DISTRICT, EAST HARARGHE ZONE OFOROMIA, ETHIOPIA

Abstract

Smallholder rural farm households face an increasing need of looking for alternative income sources to secure their livelihoods and supplement their agricultural activities. But Agriculture in study area is at subsistence stage, complex, diverse and risk prone. In Haramaya district income diversification is influenced by various factors. Thus, the aim of the study was to identify level and status of income diversification and factors responsible for participation of income diversification strategies among rural farming households in the district. The study drew a sample of 246 rural farm households through multi stage sampling technique from four Kebeles of the district. In this study both descriptive statistics and econometric model were applied. The estimated values of Simpson Index of Diversification (SID) showed that majority of the rural households had “low” and “medium” level diversified income activities. The multinomial regression analysis was applied to identify factors which influence rural household's decision participation in income diversification strategies. The result indicated that participation in income diversification strategies was influenced by the years of education of the household head, number of economically active family member, membership of farmers’ cooperative, access to credit and remittance. A Tobit regression model indicated that extent of income diversification strategies was affected by sex of household, economically active family member,livestock holding, farm size, education, distance to market, and membership of farmers’ cooperative. This study concludes that agricultural sector alone cannot be relied upon as the core activity for rural households as a means of improving livelihood, achieving food security and reducing poverty in the study area. therefore rural development strategy should emphasis on promoting income diversification strategies in rural areas to improve overall wellbeing of the rural societies