The Impact of Microfinance Institutions on the Livelihood of Rural Households: The Case of Oromia Credit and Saving Share Company in North Shewa Zone, Oromia Region, Ethiopia

Abstract

The study investigates the impact of participation in microfinance institutions on the livelihood of rural households. The study was conducted in Oromia credit and saving share company in North Shewa Zone of Oromia regional state, Ethiopia. The study includes 392 sample respondents from different Woredas. The required data was gathered using questionnaires and interviews. The logit model was used to estimate the determinants of participation in the Oromia credit and saving Share Company. The logistic regression result shows that the age of household head, family size, land size, distance, market access, perception of mandatory deposit, and evaluation of first-round loan size are significant factors that affect participation in OCSSCO. The PSM model was used to investigate the impact of participation in OCSSCO on livelihood variables. According to the ATT result, OCSSCO participants had higher average monthly income, average monthly savings, total commodity asset value, total crop production value, average monthly food expenditure, average monthly education expenditure, and average monthly health expenditure than non-treated households. Thus, rural households should participate in OCSSCO to solve their financial problem. The concerned body should work more for the expansion of OCSSCO.