Abstract
BackgroundLack of access to credit precludes smallholder farmers from making investment that generates greater level of income, consumption and wealth. To reverse this limit, Oromia Credit and Saving Share Company has been providing microcredit for rural households for the last two decades in the study area. Yet, there is limited knowledge on the impact of this microcredit service on rural household food security in Jimma zone. Therefore, this research aims at generating location-specific data on the impact of microcredit utilization on household food security in the study area. A multistage sampling procedure was employed to select 360 sample households. Data were generated through household survey, focus group discussion and key informant interview. Both descriptive and econometric data analysis techniques (binary logit model and Propensity score matching) were used.ResultsThe results reveal that educational level, family size; land size and non/off-farm income of the households influenced microcredit utilization positively, whereas livestock ownership and farm income negatively influenced it. The analysis of food security status indicate that large proportion of households are food secure. The Propensity score matching result expose that microcredit utilization has generated a positive and significant impact on household food security.ConclusionsEfforts towards scaling out services of microcredit institutions should target improving financial literacy of the rural poor and their current financial need on the basis of other resources such as land and livestock they owned with the ultimate goal of ensuring household food security. It is also imperative to realize the labour force capacity of the households in the process of expanding credit service.
Highlights
Lack of access to credit precludes smallholder farmers from making investment that generates greater level of income, consumption and wealth
Conclusions and policy implications The study attempted to analyze the impact of microcredit use on household food security in the study area
The Propensity score matching (PSM) result reveals that microcredit has brought a positive impact on the food security of households
Summary
Lack of access to credit precludes smallholder farmers from making investment that generates greater level of income, consumption and wealth. To reverse this limit, Oromia Credit and Saving Share Company has been providing microcredit for rural households for the last two decades in the study area. It is estimated that over 90% of agricultural production is from rural farm households with little access to productive resources to adopt improved technologies that will enhance food production [3]. High interest rate, lack of collateral security to receive loan, low amount of loan provided from microfinance’s, short repayment period and delay in approval or disbursement are the major constraints of credit utilization in the area under study
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