Determinants of adoption of female headed household in microfinance program: a case study on Oromia Credit and Saving Share Company (OCSSCO) in Guto Gida district, Ethiopia

Abstract

Since its introduction in the 1970, the word microfinance is being used very often in the development vocabulary today. It is taken as a strategy to overcome the constraints of conventional bank in reaching the poor and seen as one of the most efficient instruments for livelihood improvement. However, empirically the effectiveness of these programs on the livelihood of household is still inconclusive and debatable. Additionally, the relationships between socio-economic, demographic factors and participation in microfinance program are not seen in the study area and this motivated the researcher to undertake the study. The objectives of this study were identifying the factors that affect female headed household participation in microfinance program. Multi-stage sampling technique was used to draw representative sample and used cross-sectional survey. Cross-sectional survey data were collected from randomly selected 169 female headed household using interview/survey schedules. Descriptive and econometric methods were used to analyze the data. The results of descriptive statistics indicate that the majority of client household use microcredit to purchase agricultural input. Logit results indicate that program participation was significantly affected by seven explanatory variables. Among the variable’s family size of the household, livestock ownership and land size affected household participation in the program positively, whereas age of household head, distance of household home from microfinance office, wealth status of the household and household perception of risk have negative effect. Finally, the study recommends that microfinance institutions should broaden their outreach and expand its access in to large.