Influence of Micro-Finance Services on Farm Households Income: The Case of Oromia Credit and Saving Share Company–Kuyu Branch, Ethiopia

Abstract

The paper analyzes the influence of microfinance services in improving economic performance of farm households using data collected from 100 randomly selected households. Descriptive analysis of the changes in income level between the baseline and survey year was made whereas binary logit model was used to analyze the determinant of incremental income. The results revealed the existence of improvement in the household income of the clienteles. Microfinance service related variables such as proper utilization of the disbursed loan, average loan size, appropriateness of loan disbursement schedule, and access to required amount of loan were found to be significant factors influencing the incremental income of the clientele. Other determining factors include land holding, shortage of draught animals, and distance to market.  The policy implications of the results tend to emphasize on the importance of supervision of loan service, improved loan schedules, proper identification of feasible business plan, income diversification of the clientele, and strengthening market access.