IMPACT OF VILLAGE SAVING AND CREDIT GROUP ON HOUSEHOLD WEALTH IN HABRO DISTRICT, WEST HARARGHE ZONE OF OROMIA, ETHIOPIA

Abstract

In Ethiopia, agriculture has been at the core of the development strategy. To improve the prevailing low level of production and productivity, the government has been undertaking financial sector reform, to help boosting agricultural production and reducing rural poverty. In cognizant to the need for rural financial services as articulated in ADLI strategy, MFIs and SACCOs are being promoted to cater financial services to farmers. This study aimed at assessing the impact of village saving and credit group members on household wealth and to describe differences between VSCG members and non-members in Habro District, West Hararghe zone of Oromia, Ethiopia. Data were collected from randomly selected members and nonmembers of VSCG households, both members and nonmembers during the year 2015. Descriptive statistics and PSM model were used to analyze the differences between VSCG members and non-members and to investigate the impact of village saving and credit group members on household wealth respectively. Both descriptive and PSM results showed that the members of VSCG have higher entitlement on household wealth by 12826.7876 birr than the nonmembers. Also, VSCG have a positive and significant output on household wealth in terms of children education enrolment, diet food consumption and scholastic materials. The PSM model result revealed that out of the total eleven explanatory variables included in the model, total land holding of households, irrigation farm, cash crop farm size, household education level, participation in off-farm or non-farm activities and household age were statistically significant in affecting household wealth. Results of the study concluded that the supply of saving and credit at village level is crucial for farmers to increase their wealth, and development seekers have to give attention and high priority to improve lending policies towards the demand of local households to provide efficient saving and credit for increased output. Due attention has to be given to facilitate business ventures and market for the outputs of the VSG members.