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.
Highlights
Microfinance institutions have emerged as a financial institution with the aim of providing small sized financial service to the poor who were in need of financial services but lack of access to
The microfinance institutions provide small size of loans, saving, insurance services, money transfer and other relevant services to the target poor people who were excluded by conventional commercial banks due to lack of collateral requirements (Tolosa, 2014)
The analysis indicated that the participant households had better access to extension service than non-participant with the mean difference of 1.6 and which was statistically significant at 1% significance level
Summary
The microfinance institutions provide small size of loans, saving, insurance services, money transfer and other relevant services to the target poor people who were excluded by conventional commercial banks due to lack of collateral requirements (Tolosa, 2014). Agriculture directly supports 72.7% of the population’s livelihoods. It contributes 38.5% of Gross Domestic Product (GDP), and over 80% of export value (NPC, 2016)
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