Does Government Loan Provision Impacts on House Holds Income Improvement: In Focus Omo Microfinance, Duna Woreda, Southern Ethiopia

Abstract

Government loan provision programs have been considered as an instrument in poverty reduction through income improvement is recent development agenda. The main objective of this study was to investigate empirically impact of credit providing institutions on income improving thereby poverty reduction at household level referencing Duna woreda Omo microfinance institution. Mainly primary data was collected through structured questionnaire from 150 households by selecting 60 participants and 90 non-participants from three kebeles using random sampling methods. Propensity score matching (PSM) methods was used to assess the impact of institution on household income. The estimation ATT results from PSM output show that participation in loan had brought significant impact on household income. Furthermore, sensitivity analysis tested on estimated ATT result in which it shows  that effect of credit provision was insensitive to unobservable selection bias; even  the  two group allowed to differ in their odds of being treated up to 200% in terms of unobserved in which implying that being pure effect of program intervention. Thereby, improving living standard of participant and as far as ATT result was the only effect of intervention, thus microfinance intervention has impact on income improvement thereby reduce poverty at household level.  It can be recommended that, importance of microfinance in income improvement is of immense benefit to the participant households in study areas. Therefore, there is the need to help sustain it and help its growth as role to the development of the Duna Woreda and the country at large is very good.

Keywords: Microfinance, income improvement, ATT and propensity score matching