Determinants of Nonfarm Economy: The Case of North-Mecha District, Northwest Ethiopia

Abstract

Solely depending on farming is unlikely to improve food security because of pressure exerted on agricultural land by diversified activities and hence rural societies usually participate in nonfarm activities that play an increasingly important role in rural household income. A cross-sectional study was carried out in North Mecha district, Northwest Ethiopia to assess and describe the types of nonfarm livelihood activities adopted in the area, identify factors influencing farmers’ decision for diversification into the nonfarm livelihood activities, to examine the constraints to nonfarm livelihood diversification in the district and to compare annual additional income of households participated in nonfarm livelihood diversification. Data were obtained from 168 randomly selected households using comprehensive and pre-tested structured questionnaire administered to individual heads of households through interview. Purposive and random sampling techniques were used to select the study area and sample households, respectively. Data that were collected using the survey questionnaires were analyzed by employing chi-square test, Independent sample t-test, probit model and thematic analysis. Households in the study area were forced to diversify their livelihood into nonfarm livelihood activities due to land constraints, family necessity, low demand, risk aversion as well as higher returns earned by households that had been participating in nonfarm activities. Limited access to sufficient capital, poor infrastructures as well as lack of technical support and training were the major constraints which hindered farmers from undertaking nonfarm activities. The regression model result revealed that family size, education, training access, marital status, landholding and sex were major factors that determined the propensity of rural household’s participation to nonfarm activities. We argue that entrepreneurial training and skill development, facilitating resource allocation and infrastructure development would enhance the participation of smallholder farmers in nonfarm activities. To achieve this, policy makers and other stakeholders should integrate nonfarm livelihood strategies into rural farming economies.

Keywords: Households, Nonfarm livelihood activities, Probit model, Northwest-Ethiopia

DOI: 10.7176/EJBM/15-13-03

Publication date:July 31^st 2023