Determinants of rural households participation in microfinance services: The case of Cheliya District, West Shoa Zone, Oromia National Regional State, Ethiopia

Abstract

In under developed countries, most of the poor people have limited access to formal financial services, including credit, savings, and insurance. The study was focused on the determinants of the rural households’ participation in microfinance services in the study area.  The study was conducted in Cheliya District, Oromia Regional State, Ethiopia. A total of 188 sample households were selected through stratified and simple random sampling techniques and interviewed using a structured questionnaire to elicit data pertaining to participation in microfinance services during the year 2017. The data were analyzed using descriptive statistics and logistic regression model. Logistic regression model was used to analyze determinants of the rural households’ use of service in microfinance services. Accordingly, the outcome of the logistic model regression indicated that household heads’ sex, education level, cultivated land size, livestock holding and frequency of extension contact positively and significantly affected the rural household’s decision to involve in microfinance services; while dependency ratio affected their decision negatively and significantly. It is recommended that the microfinance institutions and other concerning bodies have to arrange the way in which households with high dependency ratio and illiterate can participate in microfinance services. Moreover, attention should be given by microfinance institution staffs and other government bodies to increase female involvement in microfinance services in the study area. Key words:  Microfinance, household, participation, Cheliya, Ethiopia.