Abstract:
Microfinance is the provision of financial services to low-income clients, including consumers and the
self-employed, who traditionally lack access to banking and related services. There have been few
studies on the factor affecting participation in microfinance service and the extent to which these
microfinance services are contributing towards women empowerment in Awoday district. The study also
evaluated the impact of microfinance on women empowerment in three selected kebeles of Awoday
district, Eastern Hararghe, Oromia Region. Both primary and secondary data were collected for the
study. Primary data were collected from 120 sample respondents using questionnaire prepared for this
purpose.FGD and KII were also conducted to generate qualitative information. Descriptive statistics and
econometric model were employed for data analysis. Logit and PSM were employed /used to establish a
statistically matching group/control group against which the extent of economic empowerment of the
microfinance beneficiaries was compared. Logistic regression estimation revealed that education level
of respondent, labor force in family member, women experience in income generating activity, women
participation in income generating activity and loan interest problem are significant variables which
affect the participation of the respondents’ in microfinance service. Propensity score matching method
was applied to analyze the impact of the microfinance service on the women empowerment in the study
area. The result revealed that respondents that participate in microfinance service have got total women
empowerment summation of 12.27 higher score than those respondents that were not participated in
microfinance service. Stated in other words, the access to microfinance service has increased women
empowerment of the participant sampled respondent nearly by 39.86%.Both regression and propensity
score matching method results revealed that microfinance service has significant impact on women
empowerment. Respondents that participated in microfinance service are better off in empowerment
status than that of non-participants. Hence, access to microfinance service has positive significant impact
on economic empowerment of participating women. Formal education is one of the factors that affect
women empowerments and participation in microfinance service. Participation in microfinance service
was related positively and significantly with respondents’ education. Participation on microfinance
service has negative and significant association with interest rate, due to religious prohibition in of
paying interest rate. So, proper action should be taken to encourage access to microfinance service to
enhance women empowerment, a way of access to adult formal education should be designed and finally
government and other microfinance service provider should provide Islamic banking as an option.
