FACTORS AFFECTING ON THE PARTICIPATION OF RURAL HOUSEHOLD IN INFORMAL FINANCIAL INSTITUTIONS IN CASE OF CHEHA WEREDA

Abstract

Informal financial sector provides revenue for savings and credit facilities for farmers in rural areas and for low-income household and as well as small and medium enterprises (SMEs) in urban areas. They are poorly developed and managed to the extent that they are limited in reach. So This study show that to analyze the factor affecting on participation rural household in informal financial institution from a total of 50 (18 male and 32 female) smallholder farmers from 2 out of 41 kebeles selected for sample in case of cheha woreda in gurage zone in SNNP. Under this we are to assess the factors that affect rural household participation in informal financial institution and to examine the contribution of informal financial institution on rural household. We are used randomly sampling method since selection of a sample is very convenient and is cost and time efficient. The selected design to conduct this research is not experimental or laboratory research design rather it is survey. Both primary and secondary sources were used to gather the data’s. Qualitative data were collected using structured interview and questionnaire. Both descriptive and econometric data analyze methods are using to analyze the data. The descriptive results show that household’s perception for why they are participating and for what purpose they use the service they get from informal financial institution. The logit regression analysis results show that among 8 explanatory variables which were included in the model. From this variable four variables (age of households, marital status, education status and access to formal credit) were statistically significant. The remaining four variables (sex of household, extension contact, non-farm activities and religion) was less powerful in explaining the variation for participating in informal financial institution. Among those significant variables age of household, marital status, education status affects negatively. The rest of other variables affects positively. Finally, we recommended as, government and other stakeholders should have give emphasis for those informal financial institution and they have to interfere and encourage and appreciate informal financial institution in terms of giving training how to hold their money and on how to maintain books of accounts.