CONTRIBUTION OF PRODUCTIVE SAFETY NET PROGRAM ON RURAL

HOUSEHOLDS LIVELIHOOD IMPROVEMENT IN BORICHA DISTRICT OF

SIDAMA REGION

A THESIS PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS IN BUSINESS
ADMINISTRATION

BY :Degaga
Dvisor: A shenfi kebede (phd)

POST GRADUATE PROGRAM

COLLEGE OF BUSINESS AND ECONOMICS

RIFT VALLEY UNIVERSITY

i
 RIFT VALLEY UNIVERSITY
SCHOOL OF GRADUATE STUDIES
As thesis proposal research advisor, I hereby certify that I have read and evaluated this thesis proposl
prepared, under my guidance, by Degaga entitled “contribution of productive safety net program
on rural households’ clients’ livelihood improvement in Boricha district of sidama region ”. I
recommend that it be submitted as fulfilling the thesis proposal requirement.

Signature Date

Major Advisor: _______

ii
 STATEMENT OF AUTHOR

First, I declare that this thesis proposal is my work and that all sources of materials used for this thesis
proposal have been properly acknowledged. This thesis proposal has been submitted in partial
fulfillment of the requirements for MBA. Degree at the rift valley University and is deposited at the
University library to be available to borrowers under rules of the library. I seriously declare that this
thesis proposal is not submitted to any other institution anywhere for the award of any academic
degree, diploma, or certificate. Brief quotations from this thesis proposal are allowable without special
permission provided that accurate acknowledgement of source is made.

Name:

Signature: ____________

Date of Submission:

Place: ----------------------------

iii
 ACKNOWLEDGMENT

Above all, I would like to thank Almighty GOD for giving all the patience and strength to complete
my study and allowing me to make my dreams come true after a very difficult journey.

I wish to express my deepest gratitude to my major advisor Ashenfi Kebede (Phd) for his passion and
excellent guidance. His encouragement, patience and prompt reaction in the course of undertaking this
study are greatly appreciated. Without his encouragement and professional support the thesis work
would have not been completed.

I wish to thank the staff of Boricha Woreda Omo-Microfinance sub-branch office and labor and social
affair office for their patience in providing the required information, I also thank BorichaWoreda
agriculture and natural resource office with a special thanks to food security departments for their
support and guidance in provision of basic information. My sincere thanks go to my data enumerators
and Kebele administrators for coordinating interview sessions. I am very glad to acknowledge the
productive safety net program clients for their willingness and patience in responding me to my
questionnaire at the expense of their valuable time. If they had not extended their cooperation, it would
have been impossible to complete this thesis.

Finally, I would like to express my heartfelt appreciation and gratitude to all my family and friends for
their support and encouragement.

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 ABBREVIATIONS AND ACRONYMS

ANOVA Analysis of Variance

CSA Central Statistical Authority
CCI Complementary Community Investment
DA Development Agent
DMFS Disaster Management and Food Security
FAO Food and Agriculture Organization
FSP Food Security Program
FTC Farmers Training Center
GDP Gross Domestic Product
GoE Government of Ethiopia
HABP Household Asset Building Program
HEP Household Extension Package
IFAD International Fund for Agricultural Development
IGAs Income Generating Activities
IPMS Improving Productivity and Market Success
KA Kebele Administration
KFSTF Kebele Food Security Task Force
LICU Livelihood Implementation and Coordination Unit
LTC Livelihood Technical Committee
LWG Livelihood Working Group
MoA Ministry of Agriculture
MoFED Ministry of Finance and Economic Development
MFI Microfinance Institution
MSE Micro and Small Enterprise
NFSP National Food Security Program
NGO Non-Governmental Organization
OFSP Other Food Security Program
OMF Omo-Microfinance
PSNP Productive Safety Net Program

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 ABBREVIATIONS AND ACRONYMS (Continued…)

PW Public Work
PTC Pastoral Training Center
RUSACCO Rural Saving and Credit Cooperatives
SDPRP Sustainable Development and Poverty Reduction Program
SMS Subject Matter Specialist
SPSS Statistical Package for Social Science
TLU Tropical Livestock Unit
TVET Technical Vocational Education and Training
UN United Nation
WDR World Development Report
WOLSA Woreda Labor and Social Affair

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 TABLE OF CONTENTS

Contents Page
STATEMENT OF AUTHOR v
ACKNOWLEDGMENT vii
ABBREVIATIONS AND ACRONYMS viii
TABLE OF CONTENTS ix
LISTS OF TABLES xii
LIST OF TABLES IN THE APPENDIX xiii
LISTS OF FIGURES xiv
ABSTRACT xv
CHAPTER ONE: INTRODUCTION 1
1.1. Background of the Study 1
1.2. Statement of the Problem 5
1.3. Objectives of the Study 6
1.3.1. General objective of the study 6
1.3.2. Specific objective of the study 6
1.4. Research Questions 6
1.5. Significance of the Study 6
1.6. Scope and Limitation of the Study 7
1.7. Organization of the Thesis 8
CHAPTER TWO: LITERATURE REVIEW 9
2.1. Theoretical Definitions and Concepts 9
2.1.1. Definition of income diversification 9
2.1.2. The concept of poverty and vulnerability 11
2.1.3. Definition and concepts of food security 13
2.1.4. PSNP in Ethiopia as Social Protection 16
2.2. Empirical Findings 17
2.2.1. Empirical studies on income diversification 17
2.2.2. Empirical studies on food security programs 19
2.3. Conceptual Framework of the Study 22

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 TABLE OF CONTENTS(Continued…)
CHAPTER THREE: RESEARCH METHODOLOGY 24
3.1. Description of the Study Area24
3.1.1 Location of map 25

3.1.2 Drainagepattern in Boricha woreda 26

3.2. Study Design and Procedures 27

3.3. Data Sources and Types 28
3.4. Data Collection Methods 29
3.5. Method of Data Analysis 29
3.5.1. Descriptive data analysis 30
3.5.2. Econometric model 30
3.6. Definition of Operational Variables 36
CHAPTER FOUR: RESULT AND DISCUSSION 43
4.1. Characteristics of Livelihoods ImprovementClients 43
4.1.1. Demographic characteristics of the households 43
4.1.2. Economic characteristics of the households 48
4.1.3. Institutional characteristics of the households 51
4.1.4. Geographical characteristics of the households 55
4.2. The Contribution of PSNP Livelihoods improvement of Households 59
4.2.1. Mean loan repayment by program clients 62
4.3. Income Generating Activities Adopted by the Respondent Households 64
4.3.1. Income share from livelihood strategies 67
4.4. Econometric Results 70
4.4.1. Model results 71
4.4.2. Interpretation of significant variables 73
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS 80
5.1. Summary 81
5.2. Conclusion 81
5.3. Recommendations 82

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REFERENCES 83
APPENDICES 90
Appendix I: Table 90
Appendix II: Interview Schedule 91
TABLE OF CONTENTS(Continued…)
Appendix III: Focus Group Discussion Checklist 97
Appendix IV: Key Informants Interview Guideline 98
BIOGRAPHICAL SKETCH 99

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 LISTS OF TABLES

Table Page
Table 1: Number of respondents in Kebeles 28

Table 2: Co-linearity diagnostic of continuous variables 35

Table 3: Contingency coefficients of discrete variables 36

Table 4: Definition and codes of variables included in the study 42

Table 5: Demographic characteristic of the households 47

Table 6: Mean farm size, own saving and livestock ownership 50

Table 7: Mean and percentage of institutional variables 54

Table 8: Mean distance to the nearest market 55

Table 9: Summary of continuous variables across the success categories 57

Table 10: Summary of categorical variables across the success categories 58

Table 11: Success category of the livelihoods improvement of PSNP HHs 59

Table 12: Mean loan repaid across the success category 63

Table 13 : Income sources of livelihoods improvement of PSNP respondents 66

Table 14: Income shares from the diversified livelihood activities 68

Table 15: Success of livelihoods improvement, summarize income 69

Table 16: Mean income from each activity (in birr) 70

Table 17: Multinomial logit regression of the Success of livelihoods component HHs 72

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 LIST OF TABLES IN THE APPENDIX

Appendix Table Page

Table 1: Co-linearity diagnostic of continuous variables 28

Table 2: Contingency coefficients of discrete variables 36

Table 3: Marital status of sample households 90

Table 4: Conversion factors used (TLU) 90

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 LISTS OF FIGURES

Figure Page
Figure 1:Conceptual framework of the study 23
Figure 2: Location of the study area 24
Figure 3: Graduation as thought by respondent HHs 60
Figure 4: Livelihood strategy adopted by the respondents 65

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 CHAPTER ONE
INTRODUCTION

1.1. Background of the Study

Ethiopia is one of the most food insecure countries in Sub Saharan Africa, with increasing
population that expected to reach 187.5 million at the year 2050 (Maier, 2014). According to 2014
Africa Food Security and Hunger/ Undernourishment Multiple Indicator Scorecard, Ethiopia ranks
the first having the highest number of people, 32.1 million, in state of undernourishment. When we
see the proportion, it is the fourth African country scoring (37.1 %) of the population being
undernourished (Afri-Dev et al., 2014). Poverty is the main underlying cause of food insecurity in
Ethiopia. Comprehensive Food Security and Vulnerability Analysis (CFSVA) conducted in Ethiopia
indicate that food insecure households were also below the poverty line (CSA and WFP,
2014).Currently, food security is one of the Ethiopian government economic priority areas.

Ethiopia has implemented a number of policy measures to increase food production and thereby
alleviate poverty in the last two decades. As proposed by the World Development Report (WDR,
2008), attacking poverty requires action in three areas: creating opportunities, empowerment and
livelihood security at local, national and international levels. According to the document,
opportunity means adopting policies to stimulate growth and introducing actions to expand poor
people’s assets such as improving the quality of service and implementing reform programs.
Accordingly, since 2003, Ethiopia’s National Food Security Program (NFSP) was aims to address
the problems of food shortages in drought prone areas. In the Sustainable Development and Poverty
Reduction Program (SDPRP), greater role was given to the provision of small and micro credit and
saving services where along with the None Governmental Organizations (NGOs). It was designed to
enable poor households increase output and productivity, induce new technology adoption, increase
income, reduce poverty and assist in attaining food security (Welday, 2000).

At its very beginning, Ethiopia’s National Food Security Program has four major components which
have been redesigned through different phases. This includes the Productive Safety Net Program
(PSNP), Other Food Security Program (OFSP), Complementary Community Investment (CCI)
Program and Voluntary Resettlement Program. The Productive Safety Net Program was designed to

1
assist chronically or ‘predictably’ food insecure households, as opposed to households affected by
transitory food deficits caused by a specific event through interventions designed to create
community asset that is parallel to build and protect household assets (MoA, 2006). The Other Food
Security Program (OFSP) provides financial services to the poor. Hence, rural financial policies,
goals and objectives focus primarily on the poorest and disadvantaged rural households (Birhanu,
2008). Complementary Community Investment (CCI) Program is an intervention which is designed
to create community assets and complement household investment through creating an enabling
environment. In the resettlement program each settler household is guaranteed assistance of
packages that includes provision of farm lands, seed, oxen and hand tools. The settlers are also
provided access to essential infrastructures like clean water, health post and roads.

In order to graduate from the Productive Safety Net Program, according to PSNP (2006) program
implementation manual, there is a need for the households to be linked to Other Food Security
Program (OFSP). It is Other Food Security Programs that enables poor households to create assets at
household levels and achieve food security (MoA, 2006). According to MoA, Other Food Security
Program include interventions that provide credit through government channels and loans for
agriculture, non-farm income generating activities as well as the provision of agricultural
technologies such as extension services and inputs. These OFSP vary from area to area depending on
the appropriateness of the area for specific program. However, they generally focus on providing
money at free of interest rate either in kind or in cash for similar purposes which is repayable within
one to five years.
In 2010 Household Asset Building Program (HABP) replaced the Other Food Security Program
(OFSP). Both other food security and household asset building programs provide many-sided
activities including credit service to support agricultural production, income diversification and
household asset accumulation to enhance graduation from PSNP. But in the case of HABP, credit
was accessed via Microfinance Institutions (MFIs) and the development of Rural Savings and Credit
Cooperatives (RUSACCOs). Household asset building program also has income diversification as a
specific objective that emphasizes contact with extensions agents, facilitates access to credit and
provides assistance in developing household business plans. Besides some accomplishments, there
were drawbacks in household asset building program implementation (Mohmood, 2016). With this
in view, the Government has designed the fourth phase of Productive Safety Net Program (PSNP-4)

2
in 2014. This model of Productive Safety Net Program integrates the household asset building
program as one of the Productive Safety Net Program component called the “Livelihood Component
of The Productive Safety Net Program-Four”.

The livelihoods component aims to strengthen the livelihoods of PSNP clients through diversifying
income sources and increasing incomes so that the food insecure households can build their assets
and graduate from Productive Safety Net Program (MoA, 2014). It provides technical assistance in
main livelihood pathways namely crop/ livestock and off-farm path ways .Crop and livestock
livelihoods pathwayis a path where different crop and livestock income generating activities taking
place. Development agents and Woreda subject matter specialists will provide a series of technical
trainings to clients on their selected livelihoods. Off-farm pathway composed ofincome generating
activities other than crop and livestock. It includes non-agricultural activities as well as trade and
processing of agricultural products. The provision of skills training that could be used for self-
employment as well as wage employment will be considered part of the non-farm livelihoods
activities.

The livelihoods component has its institutional arrangements in different levels of governmental
structures (MoA, 2010). More or less the stakeholders, from Woreda to federal level, are similar and
consist of Livelihood Technical Committees (LTC), Livelihood Coordination Units (LCU) and
Livelihood Working Groups (LWG) at each level. These units have their own roles and
responsibilities. LTCis a decision making body and play advisory roles on strategic issues affecting
livelihood implementation. LCUare appointed technical implementers from the sectors that are in
livelihood technical committee. They ensure that livelihood component activities are incorporated
into own institutional plans and mentor the clients.Membership of the LWG is technical staff from
livelihood implementing sector. They work on issues that are technically beyond capacity of
individual sectors and require technical support. They prepare, review and make technical
suggestions on annual work plans (both physical and financial plans) including monitoring of
pathways’. Identify areas demanding combined and strategic issues and report to the LTC.

Like as in Household Asset Building Program, the livelihoods component of PSNP-4 also targets the
Public Work (PW) part of the Productive Safety Net Program clients. Public work clients are those

3
able-bodied households who participate on public work activities to create sustainable infrastructure
to address underlying causes of food insecurity by rehabilitating the natural environment, and
constructing social and market infrastructure (MoA, 2014). This contributes to the enabling
environment for community development and addresses the underlying causes of food insecurity by
transforming the natural environment.

Shortage and poor distribution of rainfall in combination with shortage of land and continuous
cultivation resulted in poor soil fertility as well as low productivity in BorichaWoreda. These
situations leave many smallholders food insecure in the study area (kahsay, 2006). The Woreda is
one of the Productive Safety Net Programs implementing Woredas in Sidama Ethiopia where all
Productive Safety Net Program phases with livelihood component has been working for more than a
decade. There were problems in other food security program phases (PSNP- 1 and 2) and household
asset building program (PSNP-3) in achieving their goals in the Woreda. Despite the major changes
in the program design, problems like less diversification of income sources, poor loan repayments,
and low graduation rate of the food insecure households from Productive Safety Net Program are
still there.

According to the livelihood component of Productive Safety Net Program, program clients are
successful when they have diversified their income sources by using the credit that they have
accessed, add income from the new activities and exited/graduated from Productive Safety Net
Program (MoA, 2014).Therefore, this study targets to identify the factors that affect the effectiveness
of the livelihood component of Productive Safety Net Program (PSNP–4) clients.

4
1.2. Statement of the Problem

Food security remains a major issue in Ethiopia’s rural regions, as evidenced by the nation’s status
as the largest African recipient of food aid over the past two decades (Mohmood, 2016). According
to MoA (2006), successful exit from the Productive Safety Net Programis defined as when a
household can meet its food needs for the entire year without Productive Safety Net Program
transfers and withstand moderate shocks. Under this definition nearly two million individuals
“exited” from the program between 2008 and 2012. That progress did not meet the Government’s
projections and the Ministry of Agriculture (MoA) specifically characterized the exit rates as “slow”
(Mohmood, 2016).

However, Studies and program evaluation showed, support from the Other Food Security Program
and Household Asset Building Program still did not help to achieve program objectives. Households
subsequently became indebted and only 22 percent of loans were actually recovered by
2012(Mohmood, 2016). According to Mohmood Household Asset Building Program, program
evaluations, revealed that the program beneficiaries were dominated by male household heads and
focused on specific income generating activities. Program assistance did not always follow an
effective sequencing procedure. Mohmood revealed that, the exit from the Productive Safety Net
Program still fell below expectations as it was in Other Food security Program phases. These studies
did not make clear which socio-economic and institutional variables have a significant effect on the
beneficiaries’ performance.

Moreover, in livelihoods component of PSNP-4 there are complaints from livelihoods improvement
clients that had been graduated from the program. The Woreda food security document shows that,
among 2017 graduates, 17 clients had provided their appeal letter to the Kebele food security appeal
committee that claim their graduation from the PSNP was unfair. According to the unpublished
report of Omo-microfinance Boricha branch office there is poor loan repayment as it was in the
previous program phases. From the total matured program loan only 15 percent has been repaid and
this makes it difficult to revolve the credit among the clients. Therefore, this study aims to
investigate the factors that determine the success of the livelihoods improvement of Productive
Safety Net Program-Four clients.

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1.3. Objectives of the Study
1.3.1. General objective of the study
The General objective of this study is to explore contribution of the productive safety net program on
rural household’s livelihood improvement in Borricha woreda of Sidama Region Ethiopia.

1.3.2. Specific objective of the study

 To evaluate PSNP clients livelihood improvement in the study area

 To examine the success of livelihoods PSNP clients in terms of income diversifications,

income addition and graduation on the given phases.
 To explore the factors hindering the success of PSNPlivelihood improvement in the study
area
1.4. Research Questions
1. Did rural household improve their livelihood in helping productive safety-net program the
clients?

2. Are the livelihoods components of Productive Safety Net Program clients succeed in terms of
income diversifications, income addition and graduation from the program?
3. What are the factors that determine the success of livelihoods improvement of Productive
Safety Net Program clients?

1.5. Significance of the Study

Food insecurity is a long-term agenda and so many programs had been undertaken so far to
overcome the problems. Livelihoods component of Productive Safety Net Program is among those
efforts. However, there are challenges in achieving program goals in BrichaWoreda. Therefore,
understanding the livelihoods improvement of Productive Safety Net Program-Four clients
‘challenge will provide the base for further development intervention by the government and donor
organizations for further actions. In livelihood component different stakeholders have their own
responsibilities and the result of this study will reveal the contribution of those stakeholders in
improving the performance of program clients.

Moreover, there is no known research works particularly on the study Woreda on the livelihood
improvement of Productive Safety Net Program-Four. To draw an important and sustainable

6
strategic plan for the food insecure livelihoods, the research will explore information in response to
determinant factors of livelihood improvement. Generally, the findings of this research will have the
following significances. First, it will help to understand the determinants of livelihood improvement
of Productive Safety Net Program-Four clients. Second, it will help to know whether the program
has been achieving its goal or not. Finally, the result of the study will be used as a basis for further
researches on the topic.

1.6. Scope and Limitation of the Study

This study will be conducted in Boricha Woreda, Sidama Region. It is focused on the livelihoods
improvement of Productive Safety Net Program clients. They are food insecure households who had
been targeted and accessed credit services before one year and six month by the new phase program.
It assesses the success of the livelihoods improvement clients and identifies the factors that affect
clients’ success in terms of diversification, income addition, and graduation from Productive Safety
Net Program. In order to know the marginal effect of the livelihood component, the clients income
used on this research was the income from the program intervention only and not include income
from other sources like own previous asset sale.
Moreover, attempt will be made to focus on only 147 populationsof10Kebeles out of 13foods
insecure Kebeles. The Kebeles will be purposely taken where the poor have accessed credit and
technical services from the livelihoods component of Productive Safety Net Program. The
population will be taken because of its smaller size. The study is also limited with financial resource,
human resource and transportation service.

1.7. Organization of the Thesis

The remaining part of the paper is organized as follows. The second chapter deals with review of
literature, which inculcates theoretical and empirical literature review as well as the conceptual
framework of the study. The third chapter deals with brief description of the research methodology
i.e. study area, study design, sampling methods and procedures, data types and sources, data
collection methods, method of data analysis, econometric model and definition of operational
variables. Chapter four goes on dealing with the results and discussions, and finally chapter five
presents summary, conclusion and recommendations based on the major findings of the study.

7
 CHAPTER TWO
LITERATURE REVIEW

2.1. Theoretical Definitions and Concepts

2.1.1. Definition of income diversification

Diversification has been defined in various ways. Diversification means addition of livelihood
sources of income other than those of farm related ones. It is the most important way of reducing
rural poverty and increasing household income (Hengsdijk et al., 2007). According to Brugère et al.
(2008), diversification is defined as the process by which rural households construct a diverse
portfolio of income generating occupations in their struggle for survival and in order to improve
their standards of living. As per this definition, diversification can occur at a household level in
terms of adding more occupations to the portfolio of occupations. However, diversification can also
occur at a broader scale so that there are greater numbers of occupations available to households
within villages, but households may choose to engage in only a subset of these occupations.
Haggblade et al. (2010) define nonfarm diversification as seeking business or employment
opportunities other than traditional crop production and livestock rearing. Even nonfarm
diversification is related to agriculture as it includes processing and trading of agricultural produce.
Further, nonfarm activities include service provision, shop keeping and manufacturing. According to
Haggblade et al. (2010), the term rural nonfarm enterprises is used in this paper to refer to all rural
business enterprises outside of farming; it includes, for example, shops, business services, food
processing and preparation for sale, petty trading, engaged in rural crafts and so on. The term off
farm activity in this context refers to all activities away from one’s own property, regardless of
sectorial or functional classification, which can be either wage employment or self-employment
activity (Beyene, 2008). Thus, off farm is defined as time devoted to off one’s own farm work which
consists of time allocated to wage employment activities (both in farm and nonfarm sectors) as well
as nonfarm self-employment activities. Nonfarm self-employment comprises non-wage activities
such as trading, transport services (vehicles or motorcycles), weaving, handicrafts, making pottery
and so on.
Income diversification is the process by which households widen their income base by adopting new
economic activities. For rural agricultural households, this includes: agricultural diversification
8
(producing a wider variety of crops or livestock or their products); diversification from subsistence
into commercial activities; and diversification from agriculture into nonfarm activities. In the most
successful cases, income diversification creates an upward spiral of increased household incomes
and reinvestment in higher value activities. Such a spiral would be growth-promoting and poverty-
reducing. In contrast, income diversification may occur as a survival response to severe shocks and
stresses. For instance when members of poor farming households are forced to migrate in search of
wage labour or sell assets because their crops fail or they face a sudden need for extra income. This
situation refers to push factors (Samson et al, 2010).

One definition of income diversification, perhaps closest to the original meaning of the word, refers
to an increase in the number of sources of income or the balance among the different sources. Thus,
a household with two sources of income would be more diversified than a household with just one
source, and a household with two income source each contributing half of the total, would be more
diversified than a household with two sources, one that accounts for 90 percent of the total (Ersado
2003). A second definition of diversification concerns the switch from subsistence food production
to the commercial agriculture. For example, (Delgado C. and Siamwalla 1997) argue that ‘farm
diversification’ as an objective in African smallholder agriculture should refer primarily to the part
of farm household output undertaken specifically for cash generation.” A less ambiguous term for
this type of diversification is agricultural commercialization. It does not necessarily involve an
increase in the number or balance of income sources. For example, a farmer may move from
producing various grains, tubers, and vegetables for own consumption to specializing in one or a few
cash crops. Third, income diversification is often used to describe expansion in the importance
ofnon-crop or off-farm income. Non-farm income includes both off-farm wage labor and non-farm
self-employment (Escobal 2001).

Diversification into non-farm activities usually implies more diversity in income sources (the first
definition), but this is not always the case. For example, if a household increases the share of income
from non-farm sources from 30 percent to 75 percent, this represents diversification into non-farm
activities but not income diversification in terms of the number and balance of income sources. The
share of income coming from non-farm activities often correlates with total income, both across
households and across countries. This definition of income diversification is linked to the concept of

9
structural transformation at the national level, defined as the long-term decline in the percentage
contribution of the agriculture sector to gross domestic product (GDP) and employment in growing
economies.

Finally, income diversification can be defined as the process of switching from low value crop
production to higher-value crops, livestock, and non-farm activities. “High value crops” are often
defined in terms of the value per unit of weight, but it is probably more useful to define them as
crops that generate high economic returns per unit of labor or land. This definition focuses on
diversification as a source of income growth and a potential means for poverty reduction. Again,
diversification from staple crop production into high-value activities often implies greater diversity
in crops and income sources, but this is not always the case. For example, if a mixed grain-and-
poultry farmer decides to specialize in poultry production, this would represent diversification into a
high-value activity, but not diversification in the sense of multiple activities. This paper used the first
definition of income diversification i.e. income from different sources as a definition of income
diversification which is the first definition of income diversification (Ersado, 2003).

2.1.2. The concept of poverty and vulnerability

Poverty in its most basic form can be defined as a deprivation of well-being and this has been the
concern of policy makers and, more recently, of many non-governmental organizations (NGOs).
Rowntree’s study, published in 1901 was the first to develop a poverty standard for individual
families, based on estimates of nutritional and other requirements. In the 1960s, the main focus was
on the level of income, reflected in macro-economic indicators like Gross national Product per head.
In 1970s, poverty becomes prominent, notably as a result of MacNamara’s celebrated speech to the
World Bank Board of governors in Nirobi in 1973. Other factors that played a big role include the
emphasis on relative deprivation, inspired by work in the UK by Runciman and Townsend.
Townsend had the opinion that poverty was not just a failure to meet minimum nutrition or
subsistence levels, but rather a failure to keep up with the standards prevalent in a given society.
Thus, following International Labor Organization pioneering work in the mid-1970s, poverty come
to be defined not just as lack of income, but also as lack of access to health and other services.

10
The concept of basic needs inspired polices like integrated rural development. New layers of
complexity were added in the 1980s. The principal innovations were: (A) the incorporation of non-
monetary aspects, particularly as a result of Robert Chambers’ work on powerlessness and isolation.
(B) A new interest in vulnerability, and its counterpart, security, associated with better understanding
of seasonality and of the impact of shocks, notably drought. This pointed to the importance of assets
as buffers, and also to social relations (the moral economy, social capital). It led to new work on
coping strategies. (C) A broadening of the concept of poverty to wider construct, livelihood. (D)
Theoretical work by Amartya Sen (1981), who had earlier contributed the notion of food entitlement,
or access, emphasized that income was only valuable in so far it increased the capabilities of
individuals and thereby permitted functioning’s in society. (E) A rapid increase in the study of
gender. Policies followed to empower women and find ways to underpin autonomy, or agency. In
1990s UNDP developed the idea of human development: ‘the denial of opportunities and choices to
lead a long, healthy, creative life and to enjoy a decent standard of living, freedom, dignity and self-
esteem”

Rural poverty is rooted not just in asset levels and in different spatial distribution of opportunities for
growth, but also in historical factors and social and political relations among classes and castes,
ethnic groups, men and women, and different market actors. These can contribute to poverty by
creating and/or perpetuating a variety of ‘interlocking disadvantages’ that limit people’s
opportunities to improve their livelihoods, undermine their assets and capabilities and their efforts to
improve them, and increase the risks they face. These disadvantages can include a variety of forms
of exclusion, discrimination and disempowerment, unequal access to and control over assets, lack of
education and limited collective capabilities. They all contribute to making poverty a
multidimensional phenomenon, and some or all of them can sometimes be the main features of
poverty, over and above income considerations. Indeed, in some regions – particularly Latin
America and parts of Asia – rural poverty can be defined primarily in terms of non-income
deprivations (IFAD, 2011). In addition, interlocking disadvantages often reinforce each other, and
thus contribute to making it more difficult to move out of poverty.

Mutually reinforcing forms of deprivation rooted in social and political relations of course affect
certain groups of people more than others in each society. According to IFAD (2011), women, youth

11
and indigenous peoples are often disproportionately affected by disadvantages that tend to make
mobility out of poverty harder, access to existing opportunities more limited and the risks involved
in accessing them greater. This is not to say that people in these three groups are equally affected by
the same kinds or levels of disadvantage contributing to poverty. In addition, people in all three
groups can have distinctive assets and capabilities of great importance for overcoming poverty. For
instance, rural women often have specific forms of knowledge and social capital, and they play
crucial roles in the rural economy – both on- and off-farm. Rural youth often have greater capacity
for innovation and entrepreneurship than older adults, which may better equip them for addressing
some of the requirements of both agriculture and the rural non-farm economy today. Indigenous
peoples have unique forms of knowledge, practices and social capital, and they are often the
custodians of territorial resources and environmental goods of immense value. What is common to
all three groups is that social and political power distribution tends to undermine their ability to use
their assets and capabilities to seize existing opportunities to move out of poverty.

The vulnerability context that comprises trends and shocks outside of the households affect the
sustainability of the households’ livelihood (Allison, 2014). Disaster comes from different combined
hazards in vulnerable conditions and when there is low ability to decrease the negative results of
risk. Shocks are sudden and irregular events that vary in intensity and include events such as natural
disasters, civil conflict, losing one's job, a collapse in crop prices for farmers.

2.1.3. Definition and concepts of food security

The definition of food security is broad and interrelated with different factors such as agro-physical,
socio-economic and biological factors. Different institutions and organization define food security
differently without much change in the basic concepts. The roots of concern about food security can
be traced back to the universal declaration of human rights which recognized that “everyone has the
right to a standard of living adequate for the health and well-being of himself and of his family,
including food” (UN, 1948). Food security as a concept originated in 1970’s and since then it has
been a topic of considerable attention. However, the concept has become more complex due to a
shift in the level of analysis from global and national to household and individual levels. In the mid-
1970s food security was conceived as adequacy of food supply at global and national levels. This
view focused merely on food production variables and overlooked the multiple forces that in many

12
ways affected food access and the definitions of food security focused on aggregate food supplies at
national and global levels, and analysts advocated production self-sufficiency as a strategy for
nations to achieve food security.

The current working definition of food security is as follows according to FAO, “Food security
exists when all people, at all times, have physical, social and economic access to sufficient, safe and
nutritious food which meets their dietary needs and food preferences for an active and healthy life”
(FAO, 2003 ). According to FAO food insecurity exists when people do not have adequate physical,
social and economic access to food as defined above.

An understanding of food security includes the intensity and characteristics of household's food
insecurity. Food insecurity can be “chronic” or “transitory”. A constant failure to "access" food is
distinguished as chronic, while a temporary decline is considered as transitory food insecurity.
Chronic food insecurity is a sign of poverty and shows a long-term structural deficit in food
production and lack of purchasing power. Transitory food insecurity, on the other hand, implies a
short-term variability in food prices, production and income (Maxwell and Smith 1992). Transitory
food insecurity is a temporal or seasonal shortage of food because of unexpected factors for only a
limited period and it is often triggered by seasonal instability in food supply or availability and
fluctuation in prices and incomes (Degefa, 2002). Chronic food insecurity can translate into a higher
degree of vulnerability to famine or hunger. Repeated seasonal food insecurity also depletes the
assets of the households and exposes them to a higher level of vulnerability.

Food security in general is a concept that integrates a number of important issues. Its attainment
requires an overall consideration in terms of policy and program development in all aspects of the
food system. Hence, the success in production and distribution plays an important role in influencing
the food security status of an individual, a household or a society at large (Maxwell and Smith
1992). Food security is dependent on the ability of a population to access food in quantities and
qualities that satisfy the dietary needs of individuals and households throughout the year.
Considering the definition of food security adopted at the World Food Summit in 1996, four
particular dimensions can be identified: availability, access, utilization and stability. Food security is
realized, if all these four dimensions are fulfilled at the same time. According to the definition:-

13
Availability: refers to the availability of sufficient quantities of food of appropriate qualities,
supplied through domestic production or imports (including food aid). It is a function of local food
production, food importation, food aid, and other demand and supply factors in food production.

Access: is referred to access by individuals to adequate resources (entitlements) to acquire

appropriate foods for a nutritious diet. Entitlements are defined as the set of all those commodity
bundles over which a person can establish command given the legal, political, economic and social
arrangements of the community. Food access is largely determined by the ability of households and
individuals to obtain food from own production, purchases and other sources.

Utilization: is the concept that determines the quality of food that meets the nutritional requirement
for the household. The importance of this is that quantity of food does not necessarily lead to well-
nourished households.

Stability: is a very important component of the food security indicator. To be food secure a
population, household, or individual must have access to adequate food at all times. They should not
be at risk of losing access to food as a consequence of a shock, or cyclically. The concept of stability
can therefore refer to both the availability and access dimensions of food security.

Generally according to sen’s(1981) food insecurity is not because of there is no enough food, but
because people do not have accesses food. Of course, the availability of food near to the household
is a prerequisite of food security. Availability is influenced by factors such as a community’s
proximity to centers of production. Whereas food accessibility affected by the livelihood sources or
exchange entitlement of the household which inculcates production based entitlement (crops and
livestock), own-labor entitlement (wage labor and professions), trade based entitlement and transfer
entitlements.

14
2.1.4. PSNP in Ethiopia as Social Protection

Despite rapid economic growth and gains in human development over the last decade, Ethiopia
remains one of the poorest countries in the world. Food insecurity is widespread and has both
chronic and transitory components. Many people live with chronic hunger, every year being unable
to secure enough food for a significant part of the year: a large number of Ethiopians lived below the
food poverty line. Ethiopia is also highly prone to natural disasters, especially droughts, which push
more households into food insecurity and those who are already food insecure further into hunger.

In 2005, in response to these challenges, the Government of Ethiopia launched the Productive Safety
Net Program (PSNP). The drivers of this innovation have been much debated. Lavers (2016)
concludes that, whilst donors played a key role in supporting its launch by arguing that the PSNP
was a more effective and efficient way of responding to the underlying chronic food insecurity
problem than repeated humanitarian action.

PSNP, as the social protection, is part of social policy framework that focuses at reducing
poverty,social and economic risk of citizens, vulnerability and exclusion by taking measuresthrough
formal and informal mechanisms to ascertain accessible and equitable growthto all.The productive-
and social- safety net programs will be based on the establishment andimplementation of strategies
to address people in social problems, more specifically,vulnerable children, women and the elderly
under difficult circumstances, persons withdisabilities and people with mental health problems, those
labour constrained due todebilitating diseases who are unable to work, and repatriates from
emigration (Lever, 2016). According to Lever, to improve the nutritional status of children, the
productive- and social- safety netprograms to be developed shall be implemented in collaboration
and coordination withhealth extension and other structures closer to the communities.

The PSNP currently supports eight million individuals with regular multi-year transfers (World
Bank, 2017) (approximately eight per cent of the Ethiopian population) and consists of four
components (MoA, 2016).

15
2.2. Empirical Findings
2.2.1. Empirical studies on income diversification
Rural households earn their living from farm activities. However, farming alone does not provide
sufficient income for sustenance among rural dwellers (Oluwatayo, 2009). Besides, farming
activities in most parts of the developing world are characterized by seasonality implying that
households have to rely on different options for their livelihoods in different times of the year. For
instances, in southern Ethiopia livelihood strategies include livestock keeping, crop cultivation,
remittance and handcraft (Adugna, 2012) and in Kenya consist of gifts, petty business and formal
employment (Wanyama et al., 2010).

Sisay (2010) analyzed off farm activities and income among 1343 households in rural Ethiopia using
a panel data set. The key findings were as follows: the non-poor households generate a significant
amount of income from farming activities; the non-poor participate more in high earning off farm
activities while, on average, the ‘poor’ participate in low-earning off farm activity; poor households
participate due to the push factor while the non-poor participate as a choice; households with more
resources get better off farm earnings; the share of off farm income is higher for poor households,
that is, off farm income constitutes nearly 35% and 18% of household income for poor and non-poor
households, respectively, in 2008. In general, the finding indicates that the poorer segment of society
relies relatively more on off farm income and there is an entry barrier for poor households to
participate on high earning activities.

Awoniyi and Salman (2011) investigated the level of nonfarm income diversification, its effect on
welfare status of farming households and factors that determine levels of nonfarm income
diversification using Logit regression analysis. The result of the analysis revealed that the factors
that determine participation in non-farming activities are age of the household head, sex, having
formal education, household poverty status and farm size. The result of the poverty analysis
indicates that a larger percentage (53.9%) of farming households whose household heads are not
engaged in non-farming activities live below the poverty line compared with farming households
(48.3%) whose household head is engaged in non-farming activities.
Sisay (2010) provides empirical evidence from rural Ethiopia that poor households rely more on off
farm activities while the rich earn more from agriculture. His model result on determinants of

16
participating on off farm activities however confirms that household size and level of education has
a significant and positive influence on diversification. Positive influence of education on livelihood
strategy diversification has also been reported by Saha and Bahal (2010); in West Bengal; in
Western Kenya (Olale et al., 2010); in Southern Ethiopia (Adugna, 2012), again in West Bengal
(Dilruba and Roy,2012). These studies explain that educational status represent household human
capital endowment; an increase of which will strengthen the ability of engaging in other livelihood
options. Oluwatayo (2009) maintains a different stand on the effect of education on livelihood
diversification. He explains that higher educated people in rural Nigeria get better payment from
formal employment and do not have to engage in alternative livelihoods.

Simtowe’s (2010) study on livelihood diversification and gender in Malawi indicates that the
likelihood of diversification from farming is more associated with females than their male
counterparts. Similar finding is reported by Oluwatayo (2009) in Nigeria but Asmah (2011) in
Ghana differs from this opinion. Elsewhere in Kenya where primary occupation of farmers is animal
keeping, male-headed households have greater chances of diversifying into crop production due to
their relative advantage of access to land. Hence, Olale et al. (2010) report greater likelihood of men
diversifying than their female counterparts.

Saha and Bahal (2010) report negative effect of dependency ratio on the likelihood of livelihood
diversification. High dependency ratio is often associated with households with larger family size
especially married couples who normally specialized on a particular livelihood. Dilruba and Roy
(2012) confirm negative effect of dependency ratio on diversification but found no significant effect
of household size on diversification. A study conducted by Ibrahim et al. (2009) on income
diversification among farming households in a rural area of north-central Nigeria reported that
income diversification was strategy that was essential for reducing rural poverty and raising income.
The study identified the factors influencing income diversification as distance from local market and
number of extension visits the farmer received.

Most studies in the area of off farm/nonfarm income indicated that, farm characteristics of the
household are considered as main factors determining the decision of participation in off/nonfarm
activities. For example, using data on 200 households selected from 40 villages of Southeast Nigeria,

17
Ibekwe et al. (2010) examined factors determining nonfarm income. Their findings shows that age
of the household, education level and farm size are the most significant variables determining both
farm and off farm income. Specially, the size of farm land is positively associated with farm income
whereas negatively correlated with off farm income. This indicates that increases in the size of farm
land increases farmers’ willingness to operate in farm activities than participating in off farm
activities.Bedemo et al. (2013) studied factors determining the decisions to participate in off farm
work in western Ethiopia. The finding of their study shows that variables on access for credit and
size of farm land are major determinants of decisions to participate in off farm activities.
2.2.2. Empirical studies on food security programs
Different studies were conducted to identify factors affecting food security in different areas
including Ethiopia. In this section, some of the empirical evidence was mentioned. For example, the
impact assessments by (IFPRI and IDS, 2011) on the Household Asset Building Program indicate
that food security and household livelihoods in Ethiopia have improved significantly. The studies
used probity models combined with three dependent impact indicators across over the period of 2006
to 2011. In general, the findings of the study show that the impact of the two programs depends on
the level of in-kind and cash transfers made to households. It also has had differential impacts based
on geographic location and gender (e.g. transfer levels have had a larger effect on the food gap of
female-headed households).

How sustainable these outcomes are, however, a point of further research considering the livelihood
vulnerabilities of rural populations. The Productive Safety Net Program (PSNP) and the Household
Asset Building Program (HABP) have also had a significant impact on production and productivity
(Guush, Haddinnott et al., 2011).Guush et al, 2011 revealed that households receiving both the
Productive Safety Net Program and the Household Asset Building Program are 21 percent more
likely to use fertilizers than households that are not part of either program. Not surprisingly, given
their improved access to agricultural inputs such as fertilizers, the crop yields of Productive Safety
Net Program and Household Asset Building Program clients rose by 247 kgs/hectare in 2010.

Household Asset Building Program (HABP) is hampered by a combination of organizational and

policy issues that present an enormous challenge. According to ITAD (2012) evaluation of the Irish
aid Ethiopia country strategy main report, Household Asset Building Program is managed from a

18
different directorate within the ministry of agriculture than the Productive Safety Net Program. The
two strands of work, credit and technical support are again managed by two different organizations:
the federal cooperatives agency and the agricultural extension directorate in the ministry of
agriculture.

Epherm (2008) studied determinants of household food security in Sekota Woreda using logit model.
The study found that poverty household food security in the north eastern part of Ethiopia were
strongly associated with various socio-economic and bio-physical factors that influence the food
security status of households were age of household head, dependency ratio, size of cultivated land,
total number of livestock owned, number of oxen, manure application, land quality index and
farmer’s knowledge on the effect of land degradation on food security.

The static, non-separable agricultural household model was employed to examine the effect of
changing in key exogenous factors on food security and consumption pattern of rural households
covered five districts in rural Sindh based on household level data collected from the cross section
survey from August 2004 to September 2006. The evidence suggested that household full income,
food prices, and women specific variables such as age and time allocation were found significant
variables to influence household food security (Faiz, 2006). Shiferaw et al (2004) in their analysis of
household food security determinants in southern Ethiopia, they concluded that the supply-side
variables were more to determine the household food security than the demand-side variables. In
their study adopting of improved technology, having better farm size and land quality were found an
important role in ensuring household food security in the study area.

Fuad (2002) findings verified that cash crop economy with important cash flow offers a wide range
of off-farm income possibilities as compared to subsistence farming. He shows that about 45 percent
of farmers involved in cash crop production are engaged in income generating off-farm activities
while 13 percent are from the non-cash crop producers. Moreover, (Lemma, 2004) studies in two
irrigation schemes around Doni Kumbi and Bato Degaga peasant associations in east shewa showed
that average income obtained from irrigation agriculture for three consecutive years accounts 69
percent, 76 percent, 76 percent in Doni Kumbi and 0, 75 percent, 61 percent in Bato Degage. The

19
study has shown the importance of smallholder irrigation development as a drought mitigation
measure and improvement of household food security.

According to Argaw (2012), a case study on Productive Safety Net Program(PSNP) and household
level graduation in drought-prone areas of the Amahara region of Ethiopia Lay Gaint district the
binary logistic regression results showed that geographic location was vital predictor variable in
determining households’ graduation from PSNP. Being other variables constant, an increase of
inaccessibility/remoteness of a place from the center of delivery by one unit the marginal effects to
be graduated from safety nets decreases by a factor of 0.98 and 0.14 at P < 0.01 for Woina-Dega and
Kolla zones, respectively. Woina-Dega and Kolla zones are remote and inaccessible from the main
town of the district and are highly food insecure and are less likely. It was assumed that households
engage in non-farm activities can enhance the graduation of the beneficiary households. The
regression result showed that an increase in the participation of non-farm activities by one unit the
odds ratio of being graduating from Productive Safety Net Program increases by a factor of 0.312 at
P < 0.05.

Boniface et. al (2014) on the study of the effects of socio-economic factors on food security in
Kenya, the vulnerable households (54 percent ) were female headed. Lack of land and other
resources such as livestock, money and good shelter needed to facilitate farming activities were
identified as the major contributing factors to food insecurity in the area. Other factors include low
educational standards having attained primary level of education, 24 percent without formal
education and only 20 percent with either secondary or tertiary education as shown below. About 2
percent did not complete tertiary education and therefore could not be including in the categories
discussed. This has contributed to overdependence on agriculture as the only source of income due
to limited marketable skills for employment.
2.3. Conceptual Framework of the Study
The conceptual framework of this study is based on the set of interlinked factors that influence the
success of livelihoods components of Productive Safety Net Program-Four. In the study area, the
improvements in livelihoods of program beneficiaries depend on economic, demographic,
geographic and institutional factors which allow the target groups to diversify income generating
activities, add income and graduated from the Productive Safety Net Program. Economic factors

20
include farm size, own savings and livestock ownership while demographic factors such as sex, age,
family size, education level and dependency ratio. Geographic factors include distance from the
market are determinants. Moreover, institutional factors as frequency of livelihood Working Group
(WG) contact, frequency of livelihood Coordination Unit (CU) contact, participation in Rural Saving
and Credit Cooperatives (RUSACCOs), frequency of contact with extension workers and use of
improved agricultural inputs (UAI) are determinants.
In Figure 1 blow, the arrow showed the two way interdependency between the dependent variable
and the economic as well as the institutional structures.The asset position (Economic variables) of a
household has a significant effect on the success of the respondents in diversifying income
generating activity, adding income and graduation from the productive safety net program.
Resources are referred to as ‘assets’ or‘capitals’ which are categorized as natural capital, human
capital and social capital financial capital. Institutional variables result in the adoption of livelihood
strategies, which are composed of activities that generate income and enables graduation.

21
 Demographic Variables

• Sex
• Age
• Household size
• Education level
• Dependency ratio

Economic Variables
Institutional Variables
• Farm size
Success of Livelihoods • Own saving
• No. of livelihood
working group contact of PSNP-clients • Livestock ownership
• No. of livelihood (Diversification,
coordin’n. unit contact Income addition,
• No of extension Graduation)
agentscontact
• Use of agricultural
inputs
• Membership in saving
and loan institutions

Geographic Factors

• Distance from the

market

Figure 1: Conceptual framework of the study developed by the author based on available literatures.

22
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1. Description of the Study Area

Boricha woreda is one of the woredas in Sidamanational regional state of Ethiopia, part of the
located in the Great Rift Valley. This study will be carried out in Sidama region Boricha district. It
is far from Hawassa 33 K.M (Capital City of Sidama Region). Boricha woreda is shared its border
on the south with Darara woreda on the north and North West with the Bilate zuriya woreda, North
east with Dore Bafano woreda, and on the east and south east with Shebedino woreda,

Based on the 2007 census conducted by the CSA, Boricha woreda has a total population of 107,135,
of whom 53,728 are men and 53,407 women; 4453 or 4.16 % of its population are urban dwellers.
The majority of inhabitants were Protestants, with 79.89% of the population reporting that beliefs,
1.14 % Ethiopian orthodox Christianity 8.94% was catholic believers, 8.22% were Muslim and 1.81
% observed traditional religions.

The drainage pattern of the study area has showed in a poorly drained catchment. In some places, the
rainwater stays for several days lying on the ground. In addition, there are swampy areas and many
ponds in the study area. Most of the ponds were quarried by the dwellers in order to fight scarcity of
water during the dry seasons. The dwellers use this water for household purpose and for their cattle
throughout the year. The swampy area dries out within a few weeks after the end of major rainy
season (Bechaye, 2011).

Most of the study area is characterized by flat lying topography. As far as the altitudinal variation of
the region is concerned 2080m.a.s.l with some scattered ridge in between such as Boricha Ridge
2040 m.a.s.l and Siso Ridge 2020 m.a.s.l.(Bechaye, 2011 ).

According to FAO soil classification, the study area has four types of soil, namely; chromic
Luvisols, lithic leptosols, eutric vertisoils, and humic nitosols. The Woreda is mostly covered by the
chromic luvisols and eutric verti soils (ibid).

23
3.1.1. Location Map

Figure, 1(One). Ethiopian Map Showing the location of South Region (source; World Map.com)

Figure- 2
(Two): Administrative Map of South Nation (SNNPRG, Economy Finance, and Information Dissemination

Figure- 3
(Three):

Administrative Map of Boricha Woreda (Sidama Region Bureau of Agriculture)

24
3.1.2. Drainage pattern in Boricha Woreda
The drainage pattern of the study area has showed in a poorly drained catchment. In some places, the
rainwater stays for several days lying on the ground. In addition, there are swampy areas and many
ponds in the study area. Most of the ponds were quarried by the dwellers in order to fight scarcity of
water during the dry seasons. The dwellers use this water for household purpose and for their cattle
throughout the year. The swampy area dries out within a few weeks after the end of major rainy
season (Bechaye, 2011).

3.1.3. Topography
Most of the study area is characterized by flat lying topography. As far as the altitudinal variation of
the region is concerned 2080m.a.s.l with some scattered ridge in between such as Boricha Ridge
2040 m.a.s.l and Siso Ridge 2020 m.a.s.l.(Bechaye, 2011 ).

3.1.4 Soil Type in Boricha Woreda

According to FAO soil classification, the study area has four types of soil, namely; chromic
Luvisols, lithic leptosols, eutric vertisoils, and humic nitosols. The Woreda is mostly covered by the
chromic luvisols and eutric verti soils (ibid).

3.1.5. Land Use and Land Cover

The main land use of the Woreda dominated by rain fed agriculture, which is owned by smallholder
farmers. The major crops in the Woreda according to their area coverage are maize, haricot bean,
coffee, horticultural crops and teff. Limited hectare of land is using to produce certain cash crops
like chat, spice and eucalyptus trees (BWAO).

The towns in this Woreda are rural towns thus the settlement area is insignificant but, the farmland
covered a considerable large area than others land use land cover types. Especially the areas
degraded. The other dominant land features of the area covered by the scattered trees. They are
found be mixed with farmland and those planted by the dwellers. The scattered trees on the ridge are
planted by the community in collaboration with NGOs(ibid).

3.1.6 Climate

3.1.6.1 Rainfall
Rainfall is an appropriate indicator when acute food shortage result from drought, however, caution
should be taken in the way the data are used. For example, total rainfall may not correlate with yield

25
unless distribution is taken in to account (Mesfin, 1994). In addition, the start of the rainy season
may vary by as much as a month in the studied area, which adversely affects the yield. Similar to
most part of the country, rainfall in this area is characterized by fluctuation in amount and
periodicity from year to year. This fluctuating of rainfall both in amount and in periodicity, no doubt,
adversely affect the agricultural practice and the availability of food items in the area (ibid).

3.1.7. Temperature
Concerning the monthly average temperature of the study area, it varies between 21.93ºC in July and
25.36ºC in February. Moreover, the rainfall pattern of the study area varies from 27.8 2mm mean
minimum rainfall in December to the mean maximum rainfall 128.58 mm in October (ibid).

3.2. Economy of Boricha Woreda

The majority people of the Borricha district lead their life by agriculture. The woreda people
practiced Livestock rearing and subsistence farming. They plant crop products like sugarcane, sweet
potato, potato, khat/chat, etc. In addition corn, teff, enset (false banana/enset edulus ventricosum)
productions are available in the woreda. Among the above listed produces, corn and enset crops are
the leading kinds to feed the people of the woreda(Sidama Zone Department of Finance and
Economic Development, 2007 E.C).

3.2. Study Design and Procedures

This study use cross-sectional research design. Data from Productive Safety Net Program-Four
livelihoods component clients and Woreda stakeholders will be collected at a single point of time
without repetition from the representation population. The design is selected because of being the
most appropriate and economical to conduct this research. The population is food insecure
households who had targeted and accessed credit services in the livelihoods component of
Productive Safety Net Program-Four. Accordingly, there are 147 food insecure households in 10
rural Kebeles that have accessed credit since the start of livelihoods improvement of Productive
Safety Net Program-Four. All the clients had accessed the credit from Boricha Omo-microfinance at
the same time. Because of its smaller size of the clients the research has taken all the population.

26
Table 1: Number of respondents in Kebeles
Kebeles Population
M F T
Knsore areke 11 4 15
Sadamo dikicha 11 4 15
Yirba duwancho 10 5 15
Fulassaalidada 12 3 15
Aldada dela 9 5 14
Konsore fulasa 11 4 15
Bonoya chire 9 6 15
Dila olika 10 4 14
Alawo areke 12 3 15
Haja chafa 9 5 14
Total 104 43 147
Source: BorichaWoreda Omo Microfinance sub-branch office, 2021

3.3. Data Sources and Types

Both primary and secondary data will be used to achieve the objectives of this study. The primary
data will be collected from the respondents by using structured interview schedule whereas check
lists used to collect data from focus group discussions and key informant interviews. Secondary data
will be collected from records and different published and unpublished literatures. List of program
clients who accessed credit have been taken from Omo-Microfinance Boricha sub-branch office.
Information that is used to describe socio-economic activities and geographical location of the study
area will be gathered from BorichaWoreda agricultural office. Data on institutional, demographic,
and economic variables will be collected from reports of government and non-governmental
organizations, journal, books and articles.
For this study, both qualitative and quantitative data type will be used. Qualitative data is the
narrative information that gathered through focus group discussions and key informant interviews
while quantitative data refers to information collected that can be quantified in numeric form.

3.4. Data Collection Methods

Questionnaire will be designed and relevant primary information will be collected through structured
interview schedule from population households. Before assembling for interviewing, the population
households, focus group members and key informants were presented before informs& convinced

27
about issue to the Kebele Administrations (KAs) and Woreda offices. Three assistants (enumerator)
who have a college diploma educational background and can speak the local language, have
knowledge about the area and well acquainted with local culture will be recruited to assist in data
collection. After having a common understanding on the questionnaire research ethics, methods of
data collection and interviewing techniques with the enumerators, the primary data will be collected.
During data collection period the researcher followed up and observed the enumerators daily on the
spot and check the questioners right after data collection to make correction and end up with a
reliable data. The interviews were carried out by the consent of the respondents where and when
they decide to be assembled.

To obtain supplementary information for the quantitative data the researcher will conduct focus
group discussion and key informant interviews in Kebeles. In doing so, in each Kebele
Administration (KAs) a group of 5 to 7 people, consisting of ordinary farmers (Kebele leaders,
leaders of local institutions, model farmers, elders and traders) who were not clients and not
included in individual interview were selected for the discussion group. This is done by preparing a
brief check list related to factors affecting the livelihood activities and the socio-economic
environment that they are subjected to. The whole discussion is guided by the researcher. Moreover,
key informants including Livelihood Technical Committee (LTC), Livelihood Working Group
(LWG), and Livelihood Coordination Unit (LCU) as well as extension agents (Development
Agents), Rural Saving and Credit Cooperatives (RUSACCOs), Omo-Microfinance agents and
Kebele Food Security Task Force (KFSTF) will be interviewed.

3.5. Method of Data Analysis

3.5.1. Descriptive data analysis
Data will be analyzed quantitatively and qualitatively. The descriptive data analysis will be
conducted using STATA version 12 and STATA version 16. To start with the survey, questionnaires
collected was first edited, organized, coded and condensed into subsections to undertake analysis.

28
For objective one and two, the result of the analysis is summarized and presented by using
descriptive statistic tools. Percentage, frequency, F-test and chi-square test used to describe and
summarize views of different interviewees. In this case using one way Analysis of Variance
(ANOVA) - (mean, standard deviation) will be used to see the relationship. Narrative type of
analysis will be applied to analyze qualitative type of data that collected through focus group
discussion and key informant interviews.

3.5.2. Econometric model

In addition to descriptive statics, multinomial logit model will be carried out, for objective three, to
test the relation of the explanatory variables that determines the success of the respondents. The
dependent variable is a polytomous variable. Thus, a multinomial logit model when the categorical
dependent outcome has more than two levels need to be employed for such study (Brown et al,
2006). We can cite some reasons for its popularity: (1) it is a natural generalization of the binomial
logit model; (2) it is equivalent to the log linear model with grouped data; and (3) statistical software
for estimating the model is widely available (Daniel and Yu, 1999). Therefore, multinomial logit
model will be used in the study in order to identify factors affecting the success of livelihoods
component of Productive Safety Net Program clients.

3.5.2.1. Specification of multinomial legit model

When there are more than two categories (polytomous variables), the appropriate econometric model
will be either multinomial logit or multinomial probity regression models. Regarding estimation,
both of them estimate the effect of explanatory variables on dependent variable involving multiple
choices with unordered response categories. However, the latter, is rarely used in empirical studies
due to estimation difficulties imposed by the need to solve multiple integrations related to
multivariate normal distributions (Chilot and Hassan, 2008).

Moreover, multinomial legit model is a simple extension of the binary choice model and is the most
frequently used model for nominal outcomes that are often used when a dependent variable has more
than two choices.

29
In this study, therefore, a multinomial legit model specification will be employed. This model makes
it possible to analyze the effectiveness of livelihood component of Productive Safety Net Program in
the context of multiple choices. Following Green (2003), the multinomial legit model for a multiple
choice problem is specified as follows; suppose for the ith respondent faced with j choices, the study
specifies the utility choice j as:

Uij = Zijß + εij (1)

If the respondent makes choice j in particular, then we assume that Uij is the maximum among the j
utilities. So the statistical model is derived by the probability that choice j is made, which is:

Prob (Uij >Uik) for all other K ≠j (2)

Where, Uij is the utility to the ith respondent from livelihood strategy jUik the utility to the ith
respondent from livelihood strategy k

Thus, the ith household’s level can, therefore, be modeled as maximizing the expected utility by
choosing the jth category, i.e,
Max j = E (Uij) = fj (xi) +εij; j = 1... J (3)
In general, for an outcome variable with J categories let the jth option that the ith household fell on
could take the value 1 if the ith household chooses jth level and 0 otherwise. The probability that a
household with characteristics x fell on j, Pij is modeled as:

exp(X ' i β j)
pij= J
J =1. ..4( 4)
∑ exp ( X ' i β j)
j=1

J
With the requirement that ∑ Pij=1 for any i
i=1

Where: Pij = probability representing the ith respondent’s chance of falling into category j
X = Predictors of response probabilities
Βj= Covariate effects specific to jth response category, first category as the reference.

30
A convenient normalization that removes indeterminacy in the model is to assume that β1 = 0 (this
arise because probabilities sum to 1, so only J parameter vectors are needed to determine the J + 1
probabilities), (Greene, 2003) so that exp (Xi'β1) = 1, implying that the generalized equation (5)
above is equivalent to

exp(Xi β j )
Pr ( yi= j/ Xi)=Pij= J
, for j=1 … J ∧¿
1+ ∑ exp (X ' i β j)
j=1

1
Pr ( yi=1/ Xi)=Pi 1= J
(5)
'
1+ ∑ exp ( X i β j )
j =1

Where: y = A polytomous outcome variable with categories coded from 1… J.

Note: The probability of Pi1 is derived from the constraint that the J probabilities sum to 1.
That is, Pi1=1-Σ Pij. Similar to binary legit model it implies that we can compute J log-odds ratios
which are specified as;

pij
ln [ ]
piJ
=x ' ( β j−β J )=x ' β j, if , J =0(6)

3.5.2.2. Coefficient interpretation of the model

Since multinomial legit model is the extension of the binary legit models, the interpretations
resemble that of binary legit models. The major difference is that the reference category now no
longer the other choice as in binary legit. Probability in a multinomial legit model can be calculated
similarly to that in a binary legit model, with the only modification being accounting for multiple
sets of β - estimates. The meaning of legit (log-odds) and odds term is identical in both models. In
the binary case, the comparison is between category 1 and category 2 (or the first versus the last
category). In multinomial case the comparison is between category j and J (or any category versus
the last). The predicted probabilities are better interpreted using the marginal effects of the
multinomial model (Greene, 2003). Therefore, every sub vector of β enters every marginal effect

31
both through probabilities and through weighted averages that appears in 𝛿ij. By differentiating
equation (5) above with respect to the covariates we can find the marginal effect of the individual
characteristics on the probabilities (Greene, 2003). The marginal effects ( 𝛿𝛿j) of the characteristics
on the probabilities are specified as:

J
δ ij=
∂ Pij
∂ xi [ ]
=Pij β j−∑ pij β j = ⌈ β j− β́ ⌉ (7)
j=0

Where, δij denotes the marginal effect (the coefficient), of the explanatory variable on the
Probability that alternative j is chosen.

32
3.5.2.3. Detecting multi-collinearity and degree of association
Before conducting econometric analysis, the data were checked for the presence of multi-collinearity
problem among the continuous explanatory variables and the degree of association among dummy
explanatory variables. The reason for this is that the existence of multi-colliniarity will affect the
parameter estimates seriously. Collinearity means co-dependence and strong correlation among the
explanatory variables. The absence of multi-co-linearity is essential to a multiple regression model.
Multi-collinearity exist when the variables are highly correlated with one another, present the same
information and reliable estimates of their individual regression coefficients are difficult to come up
(Hamilton, 2006).

Therefore, following Gujarati (2004), there are two measures that are often suggested to test the
existence of multi-collinearity. These are: Variance Inflation Factor (VIF) for continuous
explanatory variables and contingency coefficients for dummy variables. To identify both the
statistical package known as SPSS version 16 was employed to compute the VIF values and
contingency coefficients. Variance Inflation Factor (VIF) shows the variance of an estimator is
inflated by the presence of multi-collinearity. Thus, a measure of multi-collinearity associated with
variance of inflation factor is defined as:

VIF (Xi) = (1-Ri2)-1 ------------------------------------------------------------------------------- (8)

Where, R2 is the coefficient of determination when the variable X i is regressed on the others
explanatory variables.

TOL (Xi) = (1-R2i) ------------------------------------------------------------------------------ (9)

Where, TOLi = Tolerance Level of i explanatory variable
R2i = coefficient of determination of i explanatory variable
The larger is the value of VIF the more troublesome is the multi-collinearity or collinear is the
variable (Xi). If the VIF of a variable exceeds 10 (this will happen if R 2 exceeds 0.90) that variable is
said to be highly collinear. Similarly, TOLi approaches to one when the variable (Xi) is not
correlated with other repressors.

Table 2: Co-linearity diagnostic of continuous variables

33
Continuous variables TOL VIF
AGE 0.58 1.725
HHSIZ 0.645 1.549
DEPRATIO 0.703 1.423
FARMSIZ 0.947 1.056
OSAVE 0.854 1.171
FREXTCO 0.973 1.028
FWG 0.885 1.130
FCU 0.808 1.337
DISMKT 0.947 1.056
LIVESTOK 0.745 1.421
Source: Own survey result, 2020

In order to see the degree of association between discrete or dummy variables contingency
coefficient were computed. According to Healy (1984), contingency coefficient is a chi-square test
based measure of association where a value 0.75 or above indicates a stronger relationship between
explanatory variables.

X2
C= √ N + X 2 ---------------------------------------------------------------------------------- (10)

Where C = coefficient of contingency,

X = chi-square test and
N = total sample size

Accordingly, the result of the contingency coefficient test reveals that, there were no any problems
of association among the four discrete explanatory variables (Table 3). Similarly, the output of the
VIF for the ten continuous variables were found less than 10 indicating the data has no serious
problem of multi-collinearity (Table 2). Based on the result, all the ten continuous explanatory
variables were retained and entered in to the multinomial logistic regression analysis.

34
Table 3: Contingency coefficients of discrete variables
Dummy variables SEX EDULEV MSCI UAI
SEX 1
EDULEV 0.2785 1
MSCI -0.0847 0.0597 1
UAI -0.115 0.0425 0.078 1
Source: Own survey result, 2020

3.6. Definition of Operational Variables

Income diversification: is the adoption of a range of farm, off-arm and non-farm income-generating
activities by rural households. Income generation is one of the components of livelihood strategies
(Ellis, 1998).

Income: refers to the cash earnings of the household plus payment in kind that can be valued at
market prices. This paper looks at the total incomes earned from the PSNP credit investment only.
‘Income constant’ refers to the respondents’ income from on-farm, off-farm and non-farm activities
that are equal to their initial investment/respondents with no profit. ‘Income adds’ refers to the
respondents total income from on-farm, off-farm and non-farm activities which is more than initial
investment/respondents with different level of profit.

Graduation: is a two stage process. The first is graduation from the PSNP and the second is
graduation from the Food security Program. Thus, here in this study graduation from the PSNP was
the main focal point of the research. Graduation can be defined as “A household has graduated when
in the absence of receiving PSNP transfers it can meet its food needs for the year or 12 months and is
able to withstand modest shocks.” This state is described as being Food Sufficient(MoA, 2007).

Success: For this study it was defined according to the contribution of PSNP on rural clients HH
livelihoods improvement. The respondents said to be successful when they have diversified their
income sources, add income from the new activities and exited/graduated from Productive Safety
Net Program (MoA, 2014)
Dependent variable: Is the contribution of PSNP on rural client’s livelihoods improvement. It is a
polytomous variable that indicates whether a particular respondents had not diversified income

35
generating activities + income constant (NDIGA + IC) or not diversified income generating
activities + income add (NDIGA + IA) or diversified income generating activities + add income
(DIGA + IA) or diversified income generating activities + income add + graduated From Productive
Safety Net Program (DIGA + IA + G).
Independent variables: The independent variables for this study are explanatory variables that
hypothesized to determine the contribution of PSNP on rural client’s livelihoods improvement.
Demographic variables
Sex of the household head (SEX): Sex is dummy variable which takes 1 if the respondent is male
and 0 if female. Female headed households are less likely to diversify their income sources due to
social and cultural barriers. According to Basher (2010), female headed households have less chance
to participate in off - farm and non - farm activities since they invest much time in domestic roles .
Male headed clients have more likely to diversify their income generating activities and graduated
from Productive Safety Net Program than female. Therefore, sex hypothesized to have positive
relation for clients that not diversified income generating sources and negative relation with effective
households.
Age of the households head (AGE):It is continuous variable measured in years. By its nature
agriculture needs high physical work. At age above 65 years and at age under 15 years, it is difficult
to perform productive agricultural work to produce surplus output. The study conducted by
(Senadza, 2012) showed older household heads participate less in the agricultural wage labor
market. Thus, older farmers are expected to be less active and hence rely more on-farm than off-
farm/non-farm activities. Therefore, the sign for the relation of age to the contribution of PSNP on
rural clients’livelihoodsimprovementis negative for effective households and positive for the
respondents who have not diversified income generating sources.
Education level of the household head (EDULEV): It is categorical variable. It represented as
0=not read and write, 1= grade1-4, 2=grade5-8, 3=grade9-12, 4= above 12. Respondents who have
some level of education have better ability to analyze how to convert the program inputs to asset.
However, (Demisse and Legesse, 2013) point out that better education is not important determinants
of diversification in almost all of the papers in a special issue of “Food Policy”. Therefore, education
level has positive relation to those clients who has diversified income generating activities and
negatively related with the contribution of PSNP on rural clients livelihoods improvement who does
not diversified income generating activities.

36
Household size of the household head(HHSIZ):This variable is continuous variable which refers
to the number of family members in a household. Family size is an important factor for income
diversification. In a large family some members could remain engaged in traditional farming while
others could opt for off and non-farm activities. Larger family size also increases the pressure to
diversify in order to meet the subsistence needs of the family. This means the larger the family size
the higher the probability to participate in varied income sources (Adugna and Wagayehu, 2012).
The study, therefore, hypothesized a positive relationship with clients that have diversified income
generating activities while negatively relate with those not diversified their income sources to off-
farm and non-farm sources.
Dependency ratio of the household head (DEPRATIO): Dependency ratio is a continuous
variable and described by a number. It refers to the member of the family who are economically
inactive to participate in productive activity. In a household where non-productive age groups are
higher than adults or productive age groups, the probability of the household to be in shortage of
food would be high. This is due to the fact that the working age population (active labor force i.e.,
15-64 years) supports not only themselves, but also additional dependent persons in the family
(Khatun and Roy, 2012). Thus, it is hypothesized that households with large dependent household
members are likely to be food insecure. Therefore, it is expected that dependency ratio has a positive
relation with the productive safety net program on rural clients livelihoods improvement that have
not diversified their income generating activities and negatively related with those effective
households that diversified income generating activities and earned higher income.
Economic variables
Farm size (FARMSIZ): It is continuous variable and refers to the size of farm owned and cultivated
by household in hectare. Larger farm size was expected to affect the effectiveness of livelihood
clients negatively since the farmer relay on crop production than to go for off-farm/ non-farm
activities in order to satisfy basic needs. Dilruba and Roy, (2012), have found that area of land
owned by the household has a significant and negative correlation with the likelihood of choosing
diversified livelihood. Therefore, it was hypothesized that farm size is negatively associated with
effective clients and positively relate non-diversifier livelihood component clients.

Own saving (OSAVE): Refers money that reserved in own hand or other financial institution before
taking the livelihood of the HH loan and it is a continuous variable. Money is financial capital and

37
used to create other capital. If a households are a member of rural saving and credit institution, there
is opportunity to access credit then the probability of working nonfarm are expected to increase
(Beyene, 2008). Therefore, it is hypothesized that, own previous saving has a positive relation with
clientsthat diversified income generating activities and earned higher income while negatively relate
with the non-diversifier clients.
Livestock ownership (LIVESTOCK): Livestock ownership is the amount of livestock owned by
households. It is continuous variable and measured by Tropical Livestock Unit (TLU). Households
who have better possession of livestock are expected to be less vulnerable to food insecurity. Since
households with more number of livestock obtain more milk, milk products and meat for direct
consumption. Besides, households with large livestock holding can obtain more cash income from
the sale of live animals and livestock products (Bashir, 2010; Indiris, 2012). So, it was hypothesized
that large herd size owned by the household would have positive effect on livelihood beneficiaries
with diversified income sources and negatively relate the non-diversifiers.
Institutional factors
Frequency of livelihood working group contact (FWG): It is a continuous variable that refers to
the number of contacts (in number) those livelihood working groups had with the household since
the provision of loan.Adugna and Wagayehu (2012) indicated in their study that those households
who have gained frequent extension contact choose different income generating activities than their
counterparts. FWG assumed to have a positive relationship with successful clients.
Frequency of livelihood coordination unit contact (FCU): Is a continuous variable and refers to
the number of contact (in number) that the livelihood coordination unit had with the household since
the respondent has taken the loan. According to Gebrehiwot and Fekadu (2012), those households
who have more contact with extension agents were able to access time oriented information and able
to update their knowledge,It is hypothesized FCU has a positive relationship with successful
households.
Membership in saving and credit institution (MSCI): Is a dummy variable and refers whether a
household has been saving money in saving and credit institutions or not. It represented as 1, if the
household is a member and otherwise 0.According to Raju (2014), those households who have
accessed credit from financial institutions were more likely to diversify out of agriculture. It has a
positive relationship with the success of the respondents

38
Frequency of extension contact (FEC): This variable is a continuous variable and refers to the
number of times that the household receive advice(in number) from extension agents’ since he has
taken loan. According to Gebrehiwot and Fekadu (2012), those households who have more contact
with extension agents were able to access time oriented information and able to update their
knowledge, skill and experience through training and demonstration which in turn enable them to
diversify their income. Therefore, frequent contact with DAs and the success of livelihoods
component respondents has positive relationship.
Use of improved agricultural inputs (UAI): It is a dummy variable that refers using different
improved agricultural productivity enhancing inputs. It represented as 1 if the household uses
improved agricultural inputs and 0 if not. Improved agricultural productivity will improve household
income and leads to asset creation. Anriquez and Daidone (2010) examined the effect of input
demand and production efficiency in rural Ghana. They found that expansion of the rural nonfarm
employment increases investment in most agricultural inputs. Therefore, use of agricultural inputs
and the success of livelihoodsimprovementrespondents have a positive relation.

Geographic variables
Distance from the market (DISMARK): Distance to market is a continuous variable that refers the
distance (in km) of the household to the nearest market. If the market is near, the household will
have more opportunity to participate in petty trade, and non-farm employment. Farmers near to
market also receive better price and encouraged to use their resources as much as possible and to
sale their perishable products and other agricultural products on the time. Proximity to market
centers create access to additional income by providing opportunities of selling livestock and
livestock products as well as get opportunities of engaging in employment and easy access to inputs
and transportation(Wali, 2012).Therefore, market distance is negatively affect households with
diversified income generating activity and positive relation non-diversified program clients.

39
 Research Work plan and Logistics
Table 2 work plan

S/ Activities Activity break down by months

N April May May Jun. Jun. July July
1 Proposal preparation and
Literature Review
2 Questionnaire design
3 Data collection
4 Data entry and analysis
5 Thesis write up
6 Thesis submission
7 Presentation of research
finding

Table 3: stationery and related costs

S.N Cost items Units Amount Price/unit/Birr Total price

1 printer paper Packet 9 95.00 855.00
2 Duplicating paper Packet 10 92.00 920.00
3 Photo copy services Page 960 0.50 480.00
4 Flash disk (2GB) Piece 1 279.00 279.00
5 Blank disc (RW) Piece 8 26.00 208.00
6 Printer toner Piece 1 986.00 986.00
7 Typist fee Page 252 4.00 1,008.00
8 Pencils Piece 12 1.75 21.00
9 Eraser Piece 12 3.50 42.00
10 Pencil sharpener Piece 1 36.00 42.00
11 Pen Packet 1 3.00 36.00
Sub-Total 4,877.00

Table 4: Wages, travel and other costs

S.N Cost items Units Amount Rate/day/Birr Total

1 Data enumerators’ Wage Perdiem/day 10 x 3 70.00 2,100.00
s expenses
2 Driver’s Wage Perdiem/day 26 70.00 1820.00
3 Student’s travel &Wage Perdiem/day 30 90.00 2,700.00
4 Student’s travel &Wage Perdiem/day 15 202 3030.00
expenses
Data Entry cost - - 1000.00

40
7 Telephone, internet, and fax - - - 1,000.00
Sub-Total 11,650.00

Table 5: Aggregate cost components

S/N Cost Category Amount(in Birr)

1 Total stationery and related costs 4877.00
2 Total wages, travels and other costs 11,650.00
Grand-Total 16,527.00

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