microfinance participation and its Impact on Rural Household Poverty in Chora Boter Woreda, Jimma Zone: Evidence from Oromia Credit and Saving Share Company

Abstract

The study is carried out in ChoraBoter District of Jimma Zone in Oromia Regional State aimed with the objectives to estimating of microfinance participation and its impact on the poverty of rural households. To achieve these objectives, the study undertook a cross-sectional household survey collecting primary data from 326 sample rural households‟ using a simple random sampling method in the 2020/21 production season. The collected data was analyzed using descriptive statistics and econometric approaches. Binary Logit was used for sake of analyzing determinants of microfinance participation. Additionally, the Propensity Score matching model was applied to estimate the impact of microfinance participation on rural household poverty in the study area. The descriptive analysis revealed that the microfinance participation decision differs among participants and non-participant based on socio-economic characteristics such as age, marital status, education, family size, and religion. The result of the logit model indicated that marital status, education, nonfarm participation, family size, frequency of extension contacts, and cultivated land size affect microfinance participation decision of the household positively whereas the age of household, religion (being Muslim), distance from the market, and the estimated value of asset have a negative and significant effect on the participation decision of households in the OCSSCO micro-financing services. Additionally, the study found that microfinance participation has a positive and significant effect on rural household poverty. The ATT result implied that MFP brought statistically positive significant impact on HHs expenditure levelof rural HH poverty. It is recommended that the importance of microfinance in poverty reduction is of immense benefit to the participant households in ChoraBoter woreda