THE ROLE OF MICROFINANCE INSTITUTIONS IN ADAPTATION TO CLIMATE VARIABILITY: A CASE STUDY IN SIRARO WOREDA, WEST ARSI, OROMIA NATIONAL REGIONAL STATE, ETHIOPIA

Abstract

Nowadays, the potential danger posed through climate variability and change on the global as well as local ecosystems is indisputable. Primarily, change in the state of climate is a major threat to livelihood activities, in general and rain-fed agricultural production and productivity, in particular. Thus, this study aimed at assessing the state of climate variability, and the roles of MFIs towards climate adaptation actions. The study covered 370 household heads that were determined based on a random sampling technique. Smallholder farmers’ access to MFI for adaptation actions as well as factors influencing such access were analyzed using logistic regression model. The study analyzed the historical trend of rainfall and temperature variability over the period of 1990 to 2020 based on gridded rainfall and temperature data from Aje station, as well as KII, FGD and survey observations. The standardized anomaly and Coefficient of Variability were adopted to examine the state of the climate variables. The trends of rainfall and temperature variability were measured using MK test while Sen’s slope estimator was used to determine the magnitude of change in the rainfall and temperature. Though statistically not significant, the general tendency of the seasonal mean rainfall was annually decreasing at the rate of -0.9063mm, -1.5264mm, and -1.0319mm for Bega, Belg, and Kiremt, respectively and the annual mean rainfall was decreasing annually at the rate of -3.9892mm. The mean maximum temperature during Bega, Belg, and Kiremt seasons and the annual mean maximum temperature was significantly increasing annually at the rate of 0.0940C, 0.1250C, 0.07190C and 0.09520C respectively; and the average minimum temperature was increasing annually at the rate of 0.13690C, 0.06980C, 0.07580C and 0.09080C, respectively. Thus, the findings reveal that the incidences of climate threats like drought, floods and high temperature were affected crop production that enforced the households to apply agricultural adaptation strategies like crop diversification, drought-tolerant seed cultivation and change in crop variety were adopted to reduce the vulnerability of crop farming. The major MFIs that contribute to the facilitation of financial services include OCSSCO, Cooperative and CBOs. Generally, demographic and socio economic factors that comprise microfinance associations’ membership, farming experience, annual income, adaptation strategy trainings, access to climate information and proximity to MFIs were found to have a statistically significant effect, at 5% level, on the access to MFIs. Nevertheless, MFIs profoundly contributed to climate threat adaptation investments to build the adaptive capacity of vulnerable households.