GREATLAND COLLEGE

SCHOOL OF GRADUATE STUDIES

MASTERS OF BUSINESS ADMINISTRATION

THE ASSESSMENT OF IMPACT OF MICROFINANCE ON

HOUSEHOLD SAVING: IN CASE OF LALO KILE DISTRICT,
KELLEM WOLLEGA ZONE OF OROMIA REGION

By
Gemechu Wakjira Gebisa

July, 2021
Nekemte Ethiopia

i
 GREATLAND COLLEGE
SCHOOL OF GRADUATE STUDIES
MASTERS OF BUSINESS ADMINISTRATION

THE ASSESSMENT OF IMPACT OF MICROFINANCE ON HOUSEHOLD

SAVING: IN CASE OF LALO KILE DISTRICT, KELLEM WOLLEGA
ZONE OF OROMIA REGION

RESEARCH THESIS SUBMITTED TO GREATLAND COLLEGE

DEPARTMENT OF MANAGEMENT IN PARTIAL FULFILLMENT OF
THE REQUIREMENTS FOR THE DEGREE OF MASTERS OF BUSINESS
ADMINISTRATION

BY

GemechuWakjiraGebisaIDNo: GLC/0641/12

Main Advisor: DebelaYohannis(PhD)

July, 2021

Nekemte, Ethiopia

ii
 STATEMENT OF THE AUTHOR

I,Gemechu Wakjira, hereby declares and affirms that the thesis entitled “The Assessment of
Impact of Microfinance on Household Saving: In Case of Lalo Kile District, Kellem Wollega
Zone of Oromia Region” is my own work conducted under the supervision of DebelaYohannes
(PhD). I have followed all the ethical principles of scholarship in the preparation, data collection,
data analysis and completion of this thesis. All scholarly matter that is included in the thesis has
been given recognition through citation. I have adequately cited and referenced all the original
sources. I also declare that I have adhered to all principles of academic honesty and integrity and I
have not misrepresented, fabricated, or falsified any idea /data/fact/ source in my submission. This
thesis is submitted in partial fulfillment of the requirement for a degree from the Post Graduate
Studies at Great Land College. I further declare that this thesis has not been submitted to any
other institution anywhere for the award of any academic degree, diploma or certificate.
I understand that any violation of the above will be cause for disciplinary action by the University
and can also evoke penal action from the sources which have thus not been properly cited or from
whom proper permission has not been taken when needed.

Name: Gemechu Wakjira

Signature: _________________

Date: _______________________
School/Department: Management

iii
 APPROVAL SHEET

This is to certify that the MSc thesis entitled “THE ASSESSMENT OF IMPACT OF
MICROFINANCE ON HOUSEHOLD SAVING: IN CASE OF LALO KILE DISTRICT,
KELLEM WOLLEGA ZONE OF OROMIA REGION” accepted in partial fulfillment of the
requirements for the final thesis work for the Degree of Master of Business Administration by the
school of Graduate Studies, Great Land College, carried out by Gemechu Wakjira under my
guidance. The matter embodied in this thesis work has not been submitted earlier for the award of
any degree or diploma.
The assistance and help received during the course of this investigation have been duly
acknowledged. Therefore, I recommend that it can be accepted as fulfilling the MSc thesis
requirements.

DebelaYohannes (PhD ) _____________________ ______________

Major Advisor Signature Date

iv
 DECLARATION

This is to certify that this thesis entitled “The Assessment of Impact of Microfinance on
Household Saving: In Case of Lalo Kile Woreda, Kellem Wollega Zone of Oromia Region”
submitted in partial fulfillment of the requirements for the award of the degree of masters of
Business Administration Great Land College through the Department of Management done by
Gemechu Wakjira is a genuine work carried out by him under our guidance. The matter embodied
in this thesis work has not been submitted earlier for the award of any degree or diploma. The
assistance and help received during the course of this investigation have been duly acknowledged.
Therefore, we recommend that it can be submitted as fulfilling the research thesis requirements.

DebelaYohannes (PhD ) Signature _____________ Date __________

v
 GREAT LAND COLLEGE
SCHOOL OF GRADUATE STUDIES
NEKEMTE , ETHIOPIA
___________________________________________________________________________
APPROVAL SHEET FOR SUBMITTING FINAL THESIS
As members of the board of examining of the final MBA Thesis open defense, we certify that we
have read and evaluated the Thesis prepared by Gemechu Wakjira Gebisa entitled “The
Assesment Of Impact Of Microfinance On House Hold Saving In Kellem Wollaga Zone
Lalo Kile Woreda, Oromia Regional State, Ethiopia and recommend that the thesis be accepted
as fulfilling the thesis requirement for the degree of masters of Business Administration.
_______________________________ ________________ _______________
Chairperson Signature Date
_______________________________ ________________ _______________
Internal examiner Signature Date
_______________________________ ________________ _______________
External examiner Signature Date
Final approval and acceptance

Thesis approved by
_______________________________ ________________ _______________
Department PGC Signature Date
_______________________________ ________________ _______________
Dean of College Signature Date

Certification of the final thesis

I hereby certify that all the correction and recommendation suggested by the board of examiners
are incorporated into the final thesis “The Assesment Of Impact Of Microfinance On House
Hold Saving In Kellem Wollaga Zone Lalo Kile Woreda, Oromia Regional State, Ethiopia by
Gemechu Wakjira Gebisa
_______________________________ ________________ _______________
Dean of SGS Signature Date

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 BIOGRAPHICAL SKETCH

The author was born to his father Mr. Gemechu Wakjira and his mother Mrs. Alemi Kalbisa on
December 29, 1974 E.C, Dogano in Lalo Kile district of Kellem Wollega Zone , Oromia National
Regional State, Ethiopia. He started his education at Lalo Elementary School. He attended his
secondary School at Haro Sabu senior secondary school of Dale Sadi district, and he took ESLCE
in 1996 E.C. Then he joined the College in 2000 and graduated with Diploma by Accounting in
July 2002. After graduation, the author was employed by the Ministry of sevileservice Lalo Kile
Administration office2003 and he had served for as primary expert in Lalo Kile District of
KellemWallaga zone. Then after, he joined Rift valley University College in September 2004 in a
distance program where he obtained his Degree in Accounting on September 6, 2007. After
serving the office, he was back to Great Land College to pursue his study in MBA degree in the
program of Masters of Business Administration in weekend program.

vii
 ACKNOWLEDGEMENT
Above all, I thank the GOD for giving me the strength to start and go through with my studies. I
would particularly like to extend my heart-felt thanks and appreciation to my advisor
DebelaYohannes(PhD) for his follow‐up, devotion of his precious time, valuable suggestions,
constructive comments, and systematic guidance to improve the content of this paper from
beginning to the end. He also deserves my utmost gratitude for her encouragement, on time
responses. I would like to forward my warm appreciation to Lalo Kile District Offices for their
devotion during collection of data. I would like to extend my appreciation for all interviewed and
focused group discussion farmers for their giving me time and permission to observe their plots. I
am most deeply grateful to my families for helping me strive towards the realization of my
potentials, initiation, encouragement, moral and income support. Finally, I would like to express
my gratitude to all my friends who were directly or indirectly involved to add their efforts,
encouragement and moral support for the accomplishment of this thesis.

viii
 ABBREVIATIONS AND ACRONYMS

DBE : Development Bank of Ethiopia

DECSI : Dedebit credit and saving Institutions

DFID : Department for International Development

FCA : Federal Cooperative Agency

FGD : Focus group discussion

MFIs : Micro Finance Institutions

MoFED : Ministry of Finance and Economic development cooperation

NGO Non-Governmental organization

GLC : Great Land Collage

OCSSCO : Oromia credit and saving share company

SACCOs : Saving and Credit Cooperative Unions

SSA : Sub-Saharan Africa

RSACOs : Rural Saving and Credit Cooperative Unions

SPSS : Statistical package software for the social sciences

NBE ; National Bank of Ethiopia

HHS : House Hold Saving

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Table of Contents Pages

GREATLAND COLLEGE............................................................................................................i
SCHOOL OF GRADUATE STUDIES.........................................................................................i
MASTERS OF BUSINESS ADMINISTRATION.......................................................................i
GREATLAND COLLEGE...........................................................................................................ii
SCHOOL OF GRADUATE STUDIES.......................................................................................ii
MASTERS OF BUSINESS ADMINISTRATION.....................................................................ii
STATEMENT OF THE AUTHOR............................................................................................iii
APPROVAL SHEET....................................................................................................................iv
BIOGRAPHICAL SKETCH......................................................................................................vii
ACKNOWLEDGEMENT.........................................................................................................viii
ABBREVIATIONS AND ACRONYMS....................................................................................ix
ABSTRACT..................................................................................................................................xiv
CHAPTER ONE............................................................................................................................1
1. INTRODUCTION..................................................................................................................1
1.1. Background of the Study..............................................................................................................1
1.2. Statement of the Problem.............................................................................................................2
1.3. Research question........................................................................................................................3
1.4. Objective of study........................................................................................................................4
1.4.1. General objective.................................................................................................................4
1.4.2. Specific objectives...............................................................................................................4
1.5. Significance of the study..............................................................................................................4
1.6. The scope of study.......................................................................................................................5
1.7. Organization of the study.............................................................................................................5
CHAPTER TWO...........................................................................................................................6
2. LITERATURE REVIEW......................................................................................................6
2.1. CONCEPTS AND DEFINITIONS...................................................................................6
2.2. Theoretical Framework................................................................................................................9
2.2.1. Who are the Clients of Microfinance?................................................................................10
2.3. Development of Microfinance Institutions in Ethiopia..............................................................11

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 2.4. Empirical Literature Review......................................................................................................13
CHAPTER THREE.....................................................................................................................15
3. RESEARCH METHODOLOGY........................................................................................15
3.1. INTRODUCTION.....................................................................................................................15
3.2. Research Design........................................................................................................................15
3.3. Source and Types of Data..........................................................................................................16
3.4. Sampling Strategy......................................................................................................................16
3.4.1. Target Population...............................................................................................................16
3.4.2. Sampling technique............................................................................................................16
3.4.3. Sample Size........................................................................................................................17
3.5. Data Collection Methods...........................................................................................................17
3.6. Method of data Analysis............................................................................................................18
3.6.1. Model Specification...........................................................................................................18
3.7. Reliability..................................................................................................................................19
3.8. Validity......................................................................................................................................20
3.9. Ethical Consideration.................................................................................................................20
CHAPTER FOUR.......................................................................................................................21
4. RESULTS AND DISCUSSION...........................................................................................21
4.1. INTRODUCTION.....................................................................................................................21
4.2. Household Demographic Characteristics...................................................................................21
4.3. Household Resource..................................................................................................................23
4.3.1. Household Landholding Size.............................................................................................23
4.3.2. Household Livestock Holding............................................................................................25
4.3.3. Institutional Factors............................................................................................................25
4.3.4. The Households’ Savings Behaviour.................................................................................27
4.3.5. Households Savings in Informal Financial Institutions......................................................28
4.3.6. Sample Respondents’ Savings Behavior in MFIs...............................................................28
4.3.7. Analysis of Empirical Data................................................................................................30
4.3.7.1. Independent Variables Analysis..................................................................................30
4.3.7.2. Land Holding...............................................................................................................32
4.3.7.3. Saving Culture.............................................................................................................34

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 4.4. Productivity and Efficient..........................................................................................................37
4.5. Profitability................................................................................................................................40
4.6. Inferential Statistics...................................................................................................................41
4.7. Correlation Analysis..................................................................................................................41
4.8. Regression Analysis...................................................................................................................43
4.9 Linearity.....................................................................................................................................44
4.9.3. Normality Test.................................................................................................................45
4.9.4. Multicollinearity.................................................................................................................46
Source: Survey Result, 2021...........................................................................................................47
4.9.5. Hypothesis Test...............................................................................................................48
4.9.7. Test of Autocorrelation Assumption................................................................................52
4.9.8. Analysis of Variance /ANOVA/ Test..............................................................................52
Source: Survey Result, 2021...........................................................................................................53
4.9.9. Interview results.................................................................................................................53
CHAPTER FIVE.........................................................................................................................55
5 SUMMARY, CONCLUSION AND RECOMMENDATIONS........................................55
5.1 . Summary of Findings...............................................................................................................55
5.1.1 .Livestock owner ship performance...................................................................................55
5.1.2 Land Size Holding monetary Performance.........................................................................55
5.1.3 Loan size monetary Performance.......................................................................................55
5.1.4 Saving Culture of financial Performance...........................................................................56
5.1.5 Marital status of saving financial Performance.................................................................56
5.2 Conclusion.................................................................................................................................56
5.3 Recommendations......................................................................................................................57
Referance…………………………….………………………………………………………………………………………………………………...60

APPENDIX A…………………………………………………………………………………....61

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 LIST OF TABLES

Table 1: Reliability Test..............................................................................................................19

Table 2: Gender group of household heads................................................................................21
Table 3: Educational status of household heads........................................................................22
Table 4: Age group of the house hold heads...............................................................................22
Table 5: MF participation Distribution of the household heads by mean difference in some
selected average variables...........................................................................................................23
Table 6: Sample households’ livestock ownership in TLU.......................................................25
Table 7: Resource Endowment of sampled households by MF participation............................26
Table 8: Extent to Live Stock owner ship...................................................................................30
Table 9 : Level of Live Stock owner ship...................................................................................31
Table 10: The Extent of Land Holding House Hold head.........................................................32
Table 11 : Level of Land Holding...............................................................................................32
Table 12: Extent to Loan Size in affect saving performance practice........................................33
Table 13 : Level of Loan Size....................................................................................................34
Table 14: Extent of Saving culture House Hold.........................................................................35
Table 15 : Level of Saving culture..............................................................................................35
Table 16: Level of Marital Status..............................................................................................36
Table 17 : Descriptive Analysis of Independent Variable Dimensions Statistics..................38
Table 18: Response of Respondents of OCSSCO credit staff and manager on Financial
Performance by using Likert scale is has below.........................................................................39
Table 19 : Table of productivity and efficient of Lalo Kile Woreda OCSSCO .......................40
Table 20: Correlation Analysis...................................................................................................42
Table 21: Summary of multiple regression analysis...................................................................47
Table 22: Model summary..........................................................................................................51
Table 23 : provides the results on the analysis of the variance (ANOVA).................................53

xiii
 ABSTRACT

In Ethiopia among other things Low level of society saving which is reflected in large resource
gap was one of the fundamental problems hampering production , productivity, and in come of
the people . since the access to institutional saving was very limited the majority of rural poor
house holds are forced to research financial services through informal channels and holding in
kind savings as their alternatives . To over come these problem and to mobilize rural domestic
financial resource the Government of Ethiopia supports MFI as one of the Means .To these end
the Government created conducive Environment for the development of MIF by issuing
proclamation No.40/1996(microfinance Law).
This research paper presents the Assessment of Impact of Microfinance on Household Saving: In
Case of Lalo Kile District, Kellem Wollega Zone of Oromia Region. The study examined the
influence of Microfinance practices on financial performance of House hold saving in Lalo
Kile OCSSCO. Causal research design was adopted for the study; the target population
comprised of 131 respondents. Primary data was collected using questionnaires and
secondary data was gathered from manuals income statement and the annual reports of Lalo Kile
OCSSCO. Data was collected using Purposive sampling technique from five Kebele and 131
respondents. Of the 131 questionnaires distributed, 131 were filled and returned. Both
descriptive and inferential statistics were used to analyze data, such as frequency,
percentage, weighted mean score, and multiple regression. The result revealed that have a
significant positive influence on the HHS performance . The study found that Livestock owner
ship, Land size Holding, Loan Size ,saving culture and Marital Status were all statistically
significant in explaining financial performance of the OCSSCO studied. The study further
established that that Livestock owner ship, Land Holding, Loan Size ,saving culture and Marital
Status a positive relationship with saving financial performance. The study concludes that unit
increase in that Livestock owner ship, Land size Holding, Loan Size ,saving culture and Marital
Status and results to better on saving financial performance . Hence, the OCSSCO should try to
invest more on the Encourage HHS practices as a way of improving their saving financial
performance. The study’s contribution to knowledge is equally highlighted.
Key words: Micro Finance, House Hold Saving, LKOCSSCO and that Livestock owner ship,
Land size Holding, Loan Size ,saving culture and Marital Status

xiv
 CHAPTER ONE

1. INTRODUCTION

1.1. Background of the Study

The impact of microfinance on household saving in several developing economies is

escalating from time to time. Various studies on different countries on the performance of
the MFIs confirm this (Sharif and Wood, 2017, Zeller and Meyer 2002, Robert Cull et al.
2019). For example, in Bangladesh a microfinance institution called Grameen Bank at the
end of 2000 reported 2.4 million members, where 95 percent of them are women, with $225
million outstanding loan. The number of client is a mere indicator of participation in MFIs
and for how MFI is reaching the poor. Though it is not precise, loan size is also one of the
simpler indicators that small loans represent poor clientele and poor participation
(Roodman, 2009, Morduch, 1998). In general, a lot number of microfinance institutions
have registered impressive outreach in several developing economies (Montgomery, 2017).

Until recently, aside from many credit unions, many financial institutions in developing
countries did not offer appropriate savings options for the poor households. The
microfinance movement for the past several decades has focused on the credit side of
“finance.” Many poor individuals who borrow repeatedly find themselves in a never-ending
cycle of debt, typically with extraordinarily high interest rates (Morduch, 1998). In
response, some projects have started helping clients develop savings so that they no longer
need the costly debt in order to manage their households and businesses.

Microfinance is a powerful instrument to reduce poverty. To mention some uses

Microfinance provides: it creates financial service access to beneficiaries, it builds
beneficiaries assets, it builds the beneficiaries resistance to different outside and unexpected
shocks. However, it is important to note that Microfinance is an instrument to curb poverty,
but this doesn’t mean it works in every place and for all segments of the society(Schwartz,
2013). More over, Ideally Microfinance is thought to always improve its client’s capability.
How ever, as different researches indicate this is not always the case(Orbuch, 2011). In
some cases microfinance contributes negatively and aggravate the poverty of the

1
beneficiaries, this case had been found in places where there is a surplus microfinance
institution (Bateman and Chang, 2012)
Although, in Ethiopia, the establishment of microfinance institutions is relatively a recent
phenomenon, within the last decade the number of microfinance institutions, the funds
which have been allocated to them and the number of people who have been benefiting
from the services have been rapidly growing. ‘Ethiopia has now the second largest number
of microfinance users in sub-Saharan Africa’ (Amha, 2000; Fekade and Alemu, 2020: 26).

With this background, this study is designed to analyze impact of Microfinance institutions
on household savings in Kellem Wollega Zone, Lalo Kile Woreda and through that make
recommendations to improve the effectiveness of interventions.
1.2. Statement of the Problem
Although microfinance institutions have become increasingly important safety nets of the
poor, knowledge about the achievements of these strategies remains only partial and
controversial. Several studies indicate that microfinance has positive impacts in reducing
poverty (AlemayehuYirsaw, 2020; Hossain, 2019; Remenyi, 1991; Schuler, Hashemi and
Riley, 2017; Hulme and Mosley, 2017; Pitt &Khandker, 2003 and Khandker, 2003). On the
other hand, there are studies that indicate pessimistic kind of result on the impacts of
microfinance program initiatives towards reducing poverty (Buckley, 2017; Montgomery,
2017; Rogaly, 2017; Wood and Shariff, 2017).

However, increasing poverty worsens the poverty problem in the world today (Popoola,
1999), particularly in Sub Saharan Africa. In both developed and less developed countries
the human livelihood is characterized by a sharp contrast of increasing disparity between
the rich and the poor. Microfinance in sub-Saharan Africa is a dynamic sector and the micro
finance institutions participation is escalating from time to time but has been difficult to
study because of a lack of reliable information among researchers.

There are quite a number of research works that have been done on microfinance-poverty
Lalo Kile ages in Ethiopia. The number of clients and the amounts of loans, as indicators of
participation, have been rising but, the service coverage is still insignificant and
participation of rural poor in using the microfinance services is very minimum (OCSSCO
SBP, 2021). These problems are coupled with those relating to land tenure, lack of inputs,

2
unemployment and underemployment, inadequate and fragmented farm size, inadequate
infrastructure (Arnessen, 1989), pricing and marketing (Tesfaye, 1989) and overall macro-
policies of the country(Fassil,1977).

Microfinance plays key role in achieving human, physical and social capital to poor people.
Creating access to education, training and productive capital, organizational building, and
providing physical capital contribute to the self-confidence of the poor. The provision of
capital to the poor in order to alleviate individuals' poverty is not the only aim of
Microfinance; rather it creates financial institutions to poor people who are excluded from
the formal sector Wreen (2019). On similar lines, report of the National Bank of Ethiopia
(2021), states that MFs play vital role in income generation and asset building as well as
poverty reduction and that is mainly because; MFs largely serve low income groups that
have no or little access to formal loans.

In Oromia, a number of researches have been conducted to examine the contributions of

microfinance, but focused mainly on financial and physical capitals; which in turn
underlined in income and household asset of beneficiaries, respectively. Popoola (1999)
and Tesfaye (1989) for instance, studied DECSI‟s contribution in relation to financial and
physical capitals which are household consumption and housing improvement respectively.
Moreover, the results indicate that microfinance credit significantly raised both annual per
capita household consumption and the probability of improving housing (roofs), which is
an important welfare indicator in the study area. But, all these research have not analyzed
the impact of Microfinance on household saving in Oromia regional state, especially in
Kellem Wollega zone, Lalo Kile Woreda. Thus, the research fills this gap.

1.3. Research question

 What is the level of awareness of households on impact of Microfinance on their
saving?
 Does Microfinance have significant impact on household saving in Lalo Kile
Woreda?
 Does participation in microfinance increase the saving capacity of its clients?
 What are the factors that affect household saving?

3
1.4.Objective of study

1.4.1. General objective

The objective of this study was investigating the impact of Microfinance on Household
saving in Lalo Kile Woreda, Kellem Wollega zone.

1.4.2. Specific objectives

The study has the followings specific objectives:

 Assess the level of awareness of households on impact of Microfinance on their
saving
 Identify determinants of saving behavior of households in Lalo Kile Woreda
 Investigate the status of participation of household in microfinance
 Analyze the factors that affect household saving in Lalo Kile Woreda

1.5. Significance of the study

It increases the research materials related to micro finance in the locality and inspires other
researchers to make further investigation. Carrying out such an empirical research would
serve both academic and practical purpose. The outcome of this study may serve as an input
for MFIs, policy makers and other beneficiaries’ .Above all, this research may help the
staffs, managers and donors of the program to improve their services. In addition the
research may serve as an eye opener and a pointer towards further study as it is the first
empirical research in the area on the impact of micro credit on clients.

The different researchers can use this as a reference material in the future. The outcome of
this study therefore, it used as the fulfillment of academic requirement and assistances to
develop an experience on how to conduct other research in the related area. The study also,
gives some information to the consumer about how service quality affects their satisfaction
in healthcare.

1.6. The scope of study

The study was conducted in Lalo Kile town which is found Kellem Wollega zone of
Oromia Regional state. This study will use five years data. The study aims to examine the

4
impact of MF programs on household saving because the time and, while the definition of
saving is a complex issue with various dimensions, and found difficult to fully investigate
changes in gender relations. Therefore, the study focused on some accessed effects of MF
on asset building and saving at hose hold level in relation to the impact had assisted the
members to cop stress and difficulties and has brought changes in gender relation.

1.7. Organization of the study

These research was organized into five chapters. Chapter one: background of the study,
statement of the problem, objectives of the study, research questions, scope of the study,
significance of the study; Organization of the study; Chapter two: Literature review:
theoretical and empirical literatures; Chapter three: the research methodology: research
design, data collection instruments, sampling design and data analysis methods, Chapter
four Result and Discussion and the last chapter five had summery ,Conclusion and
Recommendations and It had also Reference And Appendix.

5
 CHAPTER TWO

2. LITERATURE REVIEW

2.1.CONCEPTS AND DEFINITIONS

The clarification of basic concepts such as Credit, Microfinance Institutions, Saving,

poverty, and others is vital before assessing determinants and challenges of farmers’
participation in microfinance institutions and their behavior in savings.

Credit: The word credit comes from the Latin word Credo meaning believe’’. Or
creditomeans an agreement by which something of value of goods, services or money is
given in exchange for a promise to pay at a later date (Houghton Mifflin Company, 2004).
Hence, credit is any sort of arrangement by which you obtain money, goods or services and
agree to repay at a later date with agreed rate of interest for its use. It, further, means
obtaining purchasing power now by means of promise to repay at some time later (Smith,
1963).

Microcredit: is the extension of very small loans (microloans) to poor borrowers who
typically lack collateral, steady employment and a verifiable credit history. It is designed to
spur entrepreneurship, increase incomes, alleviate poverty and often also to empower
women. Microcredit is a part of microfinance, which is the provision of a wider range of
financial services, in particular savings, to the poor. As of 2009 it was estimated that there
were 74 million recipients of micro credits with a total of $38 billion in outstanding loans.
Modern microcredit is generally considered to have originated with the GrameenBaLalo
Kile founded in Bangladesh in 1983s. Many traditional baLaloKiles subsequently
introduced microcredit, even though they had earlier on discounted its likelihood of
success. As of 2012, microcredit is widely used in developing countries and it is presented
as having "enormous potential as a tool for poverty alleviation."The United Nations had
declared 2018 the International Year of Microcredit (Rutherford, 2021).

6
Microfinance: Microfinance is the provision of financial services to low-income clients or
solidarity lending groups including consumers and the self-employed, who traditionally
lack access to baLaloKileing and related services. More broadly, it is a movement whose
object is "a world in which as many poor and near-poor households as possible have
permanent access to an appropriate range of high quality financial services, including not
just credit but also savings, insurance, and fund transfers."Those who promote
microfinance generally believe that such access will help poor people out of poverty
(Rutherford, 2021).

According to Paolo, 2021, microfinance is a broad category of services, which includes

microcredit. Microcredit is provision of credit services to poor clients. Although
microcredit is one of the aspects of microfinance, conflation of the two terms is endemic in
public discourse. Critics often attack microcredit while referring to it indiscriminately as
either 'microcredit' or 'microfinance'. Due to the broad range of microfinance services, it is
difficult to assess impact, and very few studies have tried to assess its full impact.
According to the study by Brown, 2018, micro finance is the supply of loans, savings,
money transfers, insurance, and other financial services to low-income people.
Microfinance institutions (MFIs)—which encompass a wide range of providers that vary in
legal structure, mission, and methodology—offer these financial services to clients who do
not have access to mainstream baLaloKiles or other formal financial service providers. It
involves small-scale financial services-primarily credit and saving provided to people who
farm or fish or herd; who operate small enterprises or micro enterprises where goods are
produced, recycled, repaired, or sold; who provide services; who work for wages or
commissions; who gain income from renting out small amounts of land, vehicles, draft
animals, or machinery and tools; and to other individuals and groups at the local level of
developing countries, both rural and urban (Rutherford, 2021).
Microfinance is the provision of small scale financial services to low income clients who
have no access to financial services provided by the formal sector (Ledgerwood, 1999;
Robinson, 2020). According to the study by Karlan and Goldberg (2019), microcredit is
the provision of small scale financial services to people who lack access to traditional
baLaloKileing services. The term microfinance usually implies very small loans to low-

7
income clients for self-employment, often with the simultaneous collection of small
amounts of savings.

“Microfinance” by its name clearly is about more than just credit, otherwise we should
always call it microcredit. Many programs offer stand-alone savings products, and
remittances and insurance are becoming popular innovations in the suite of services offered
by financial institutions for the poor (Morduch, 2009).
Saving: This is a mechanism by which economic agents make deliberate choice to allocate
the portion of their current income for the purpose of making investments and increasing
their future earning capacities. Theory suggests that households’ total savings depend on
the rate of return on savings, on uncertainty of future incomes, on risk aversion of
households, on lifetime or permanent income or wealth, on family characteristics, and on
the availability of borrowing (Gersovitz, 2019, cited in FAO, 2017). In particular, increases
in uncertainty in the face of liquidity and borrowing constraint will increase the total
volume of household savings and particularly the portion of precautionary savings (Rich,
and Olive, 2018). Savings may be made in terms of cash and fixed assets such as jewellery,
livestock, grain or some other common goods (Azhan, 1995).
Saving in the form of assets has limitations. Grain can deteriorate in storage, can be lost to
pests, animals require looking after and can die; moreover, when they are held as insurance
against crises such as drought, they are often sold at a loss, if the crisis occurs. Because of
deterioration in grain or assets, it can make it hard to resist demands and claims from other
relatives (Johnson and Ben, 2017).

According to the study by Rutherford, (2021), saving can be of two types.

Saving up:- Rutherford argues that the basic problem poor people as money managers face
is to gather a 'usefully large' amount of money. Building a new home may involve saving
and protecting diverse building materials for years until enough are available to proceed
with construction. Children’s schooling may be funded by buying chickens and raising
them for sale as needed for expenses, uniforms, bribes, etc. Because all the value is
accumulated before it is needed, this money management strategy is referred to as 'saving
up'.

8
Saving down:-Often poor people don't have enough money when they face a sudden
problem; so, they borrow. A poor family might borrow from relatives to buy land, from a
moneylender to buy agricultural inputs, or from a microfinance institution to buy a sewing
machine. Since these loans must be repaid by saving after the cost is incurred, Rutherford
calls this 'saving down'. Rutherford's point is that microfinance is addressing only half the
problem, and arguably the less important half: poor people borrow to help them save and
accumulate assets. MFIs should fund their loans through savings accounts that help poor
people manage their myriad risks.

Poverty: What is the precise definition of poverty, how to measure it and who constitutes
the poor are difficult questions to answer. An operational and comprehensive definition of
poverty has long been needed to fight poverty in a more effective way. However it is
fiercely a contested issue. The centerpiece of the debate about defining poverty is whether
poverty is largely about material needs or whether it is much broader set of needs that
permit wellbeing (Hulme and Mosely, 2017). Approaches focusing on the material need
focus on consumption
usually using income. Greely, 1994, as cited in Hulme and Mosley, 2017, has strongly
defended the use of income-poverty measures. However, Chambers, 1995, has identified
various forms of deprivation that cannot be captured by income poverty measures. The
levels or degrees of poverty are also of important consideration in defining poverty in a
comprehensive way. For the purpose of this paper the definition of poverty incorporates
economic deprivation of people or households, particularly in terms of income.

2.2. Theoretical Framework

Poverty is the major problem in most developing economies. In these economies, it is

argued that among others absence of access to credit is presumed to be the cause for the
failure of the poor to come out of poverty. Meeting the gap between demand and supply of
credit in the formal financial institutions frontier has been challenging (Desale, 2020). In
fact, the gap is not aroused merely because of shortage of loan-able fund to the poor rather
it arises because it is costly for the formal financial institutions to lend to the poor. Lending
to the poor involves high transaction cost and risks associated with information
asymmetries and moral hazards (Gine and Klonner, 2003). Nevertheless, in several
9
developing economies governments have intervened, through introduction of microfinance
institutions to minimize the gap then allow the poor access to credits. Micro finance is
currently enjoying widespread acceptance as an anti poverty strategy in the developing
world. In Ethiopia though savings and credit programs were operated for a number of years
by NGOs, Micro finance in a regulated form is a new phenomenon.

The delivery of microfinance services to the rural poor in Ethiopia is one of the effective
instruments of promoting food production and food security. All MFIs have a shared vision
of poverty alleviation. According to Wolday (2003), Ethiopia has a favorable macro policy
environment and regulatory framework to promote sustainable micro finance activities.

Although the development of microfinance institutions started very recently, the industry
showed a remarkable growth of outreach, particularly in terms of active clients. Ethiopian
MFIs should focus on the responsiveness of their financial products to the needs of their
clients. They also learn from what their clients wanted and then produce products by
incorporating the information from market research or needs survey on one hand, and
develop built-in tools to measure the impact of the credit on the other. These types of
assessment will help MFIs to collect feedback, which makes them financially, and
operationally sustainable (Assefa, Gebrehiwot, and Mulat, 2018).

Realizing the need for micro finance services, the government of Ethiopia issued a
microfinance law in 2017. The main objective of the micro finance institutions is the
delivery of financial services (providing micro-loans, micro-savings, micro-insurance,
money transfer, etc) to a large number of productive but resource-poor people in rural and
urban areas, including micro and small entrepreneurs in a cost-effective and sustainable
way. The interventions of the micro finance institutions, at the end of the day, should make
positive and measurable impact on the lives of the poor (Desale, 2020).

2.2.1. Who are the Clients of Microfinance?

According to Microfinance Information Exchange (MIE), 2009, the typical microfinance

clients are low-income persons that do not have access to formal financial institutions.
Microfinance clients are typically self-employed, often household-based entrepreneurs. In

10
rural areas, they are usually small farmers and others who are engaged in small income-
generating activities such as food processing and petty trade. In urban areas, microfinance
activities are more diverse and include shopkeepers, service providers, artisans, street
vendors, etc. Microfinance clients are poor and vulnerable non-poor who have a relatively
unstable source of income. Access to conventional formal financial institutions, for many
reasons, is inversely related to income: the poorer you are, the less likely that you have
access. On the other hand, the chances are that, the poorer you are, the more expensive or
onerous informal financial arrangements. Moreover, informal arrangements may not
suitably meet certain financial service needs or may exclude you anyway. Individuals in
this excluded and under-served market segment are the clients of microfinance (Westover,
2020).
As we broaden the notion of the types of services micro finance encompasses, the potential
market of micro finance clients also expands. It depends on local conditions and political
climate, activeness of cooperatives, NGOs and support mechanism. For instance,
microcredit might have a far more limited market scope than say a more diversified range
of financial services, which includes various types of savings products, payment and
remittance services, and various insurance products. For example, many very poor farmers
may not really wish to borrow, but rather, would like a safer place to save the proceeds
from their harvest as these are consumed over several months by the requirements of daily
living. Central government in India has established a strong & extensive between
NABARD (National Bank for Agriculture & Rural Development), State Cooperative ,
District Cooperative, Primary Agriculture &Marketing Societies at national, state, district
and village level (Westover, 2020).

2.3. Development of Microfinance Institutions in Ethiopia

In Ethiopia, though saving & credit programs were operated for a number of years by
NGOs, microfinance operation in a regulated form is a relatively new phenomenon
following proclamation 40/2017. The early formal microfinance activity is the DBE pilot
Credit Scheme, initiated in 1990 under the Market Towns Development Project,
implemented in 1994. Even though many N GOs had credit schemes for years, NGO

11
programs that emphasized both credit & saving were emerged in 1990s. For example,
REST of DECSI, 1993; OSHO of OCSSCO, 2017; (Kebede, 2003).

Microcredit and microfinance in Ethiopia have been initiated and supported by NGOs (both
local and international) and government projects. In the previous years, there were thirty
NGOs offering credit especially for urban areas (Pischke et al., 2017, cited in Wolday,
2002). According to the same source the NGO supported microfinance programs usually
face the problem of mixing up social and financial objectives and recommended that NGOs
in the country, which offer microfinance services, should be subjected to national standards
and that the adoption of appropriate standards could improve their performances.

After proclamation 40/96 was issued, NGOs were prohibited from directly involving
themselves in credit and savings activities (Wolday, 2002). However, currently, NGOs are
playing a very important role by initiating and supporting their own microfinance
institutions and providing funds to MFIs. They are also directly involved in organizing and
supporting saving and credit cooperatives, which improve access to financial resources to
the poor. According to the same source in spite of the regulation prohibiting both the
government and NGOs from delivering microfinance services to clientele, government
organizations and institutions such as the Bureau of industry provide credit to micro
enterprises. Actually, the volume of micro credit delivered by NGOs and various
governmental organizations has significantly after the implementation of the proclamation
40/2017.
Since the enactment of proclamation 40/2017, there have been 27 MFIs in Ethiopia. About
30% of the MFIs were established by regional states and the others by nongovernmental
organizations. There are considerable variations in their geographic distribution and shares
in total capital of the microfinance industry. For example, 11 of the 27 MFIs (about 41%)
were located in the capital Addis Ababa and 13 (about 48%) in Oromia region, with 21.1%
and 18.2% of shares in total capital of all MFIs, respectively. Moreover, about 81.3% of the
total capital of all MFIs is owned by only four MFIs, i.e., Amhara (25.6%), Dedebit
(24.3%), Addis (16.7%) and Oromia (14.7%) MFIs. With in a region, the existing branches
of the MFIs have not covered some districts. As reported by NBE (2006), the total capital
of all MFIs in Ethiopia amounted to 817.3 million Birr or (about 1.2% of GDP), of which

12
770.2 million (about 1.1% of GDP) was mobilized through savings and the rest from
shareholders and donor funds, whereas it extended a total credit about 2 billion Birr to
about 1.5 million borrowers throughout the country.

The major target clients of most of the MFIs operating in urban areas are women unlike that
in rural areas, where the lion’s shares of the clients are male. The objective of almost all of
the microfinance institutions in Ethiopia is poverty alleviation (Bekele and Wolday, 2020).
All these licensed MFIs are under clear regulatory framework, which include a loan ceiling
of 5,000.00 Birr, maximum loan duration of one year, and delivery of financial services
based on group collateral. The lending interest rate varies ranges from 12.5 to 25% where
as that of saving ranges from 6% to 8% (Sam, 2019).

2.4. Empirical Literature Review

Participation in microfinance has been increasing from time to time in several developing
economies. Various studies conducted in different countries on the performance of
microfinance institutions attest to this fact (Zeller and Meyer 2002, Robert Cull et al.
2019,Paolo, 2021).For example, the study by Paolo (Aug. 2021)had found that some of the
biggest microfinance institutions such as BRAC, GrameenBaLalo Kile, ASA and SKS have
more than 35 million participants. He further indicated that in Mexico, of the total
population of about 108 million, the major three microfinance institutions served in 2020
about 3.1 million or 2.8% of the national population. In India, where the situation is more
fragmented with several microfinance institutions present in the country, the biggest
microfinance institutions serve about 10 million clients. This data suggest that some
countries are making of microfinance a part of the economy which can compete with
traditional baLaloKileing services.

Lakew (1998) examines POCSSBO's 6 micro financing program contribution to poverty

reduction. He found that after the credit program employment opportunity for the
beneficiaries have been created. He also noted that the credit program of POCSSBO had
positive effect on income and saving of the clients. In addition, He stated that medical,
education and nutrition access of the clients had been improved. Similarly, Aklilu (2002)
reviews the importance of micro finance institutions in developing economies based on

13
countries' experiences. In the review she suggested for promotion of the existing well
developed institution 'iddir" to facilitate growth of formal MFIs.
Borchgrevi Lalo Kile (2018), studies on marginalized groups, credit and empowerment for
the case of Dedebit Credit and Saving Institution (DECSI) of Tigray found that female
household heads are extremely marginalized groups; and also, young households', rural
landless households and urban house-renting households are the other marginalized groups.
These findings agreed with that of Agola(2014) found a positive relationship between
financial performance, credit policy, credit risk controls, credit appraisal and collection
policy.

The findings also agreed with that of World Vision Micro Finance.org.(2010) who found
that credit policy have a positive effect on financial performance of deposit taking
OCSSCO Through two-phase assessment, the study found that the Lalo Kile CSI's program
has had a positive impact on the livelihood House Hold Saving and as well enhanced the
social and political position of many consumers. Concerning the constraints for economic
development, the study noted poor rainfall, small farm size, and shortage of labor during

peak agricultural seasons as the main constraints (Alemayehu, 2020)

Conceptual Frame Work

Livestock owner ship

Land size Holding

House Hold Saving
Loan size

Saving Culture

Marital status

Figure i: Conceptual Framework

Source: The researcher modified model from World Vision Micro.org (2010)
14
 CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1. INTRODUCTION

Microfinance includes the delivery of financial services to the poor. The sample has been
designed in such a way so that member households of microfinance programs can be
compared to non-member households with similar characteristics. The reasons for selecting
Lalo Kile Woreda for this study is that there are high impact of microfinance on
households’ saving in the study area. There is disparity between members of microfinance
and non-members of microfinance in Lalo Kile Woreda. It is because of this that the
researcher selects Woreda.
In the Lalo Kile Woreda, some households use credit from microfinance for production and
thereby save some part of their income in general; whereas, others are not using credit
services for their different activities and thus, their saving is very low. This initiated the
researcher to conduct a study on the impact of microfinance on household saving in Lalo
Kile Woreda. No such study in the area has so far been made with respect to the title of the
research.

3.2. Research Design

Research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure
(Kothari, 2004).To perform this research the researcher would use descriptive and
explanatory research design. Descriptive research is concerned with describing the
characteristics or functions of particular respondents, phenomenon and pattern of the study.

15
Explanatory research design used to explain the impact and relation that exist between the
features of leadership style and public sector performance. To reach on appropriate
conclusion about the issue and in order to answer research questions the necessary data
would be collected through both qualitative and quantitative approaches. Qualitative
approach would allow the researcher to give more information, whereas, quantitative
approach would allow the researcher to determine and evaluate statistical data.

3.3. Source and Types of Data

The selection of Lalo Kile Woreda as the focus of this study is based on one of the
objectives of this study - which is to assess the impact of microfinance on household saving
in Lalo Kile Woreda. In order to achieve research objectives & answering the research
questions, the researcher will use primary data for this study and some secondary data of
five years.

3.4. Sampling Strategy

3.4.1. Target Population

The target population for this study is both borrowers and non-borrowers of credit from
Microfinance institutions. From22 rural and one urban Kebeles in Lalo Kile Woreda only
five kebeles was the target kebeles for this study (Lalo Kile Woreda Agriculture office,
2021). The target population for this study is households from five kebeles (Lalo town,
Sarbaa, Nya’a, jeno and Amara Kucho).

3.4.2. Sampling technique

Lalo Kile Woreda has 22 village kebeles and 1 urban kebele. The total population of Lalo
Kile Woreda is 79,546 (39,388 males, 40,131 females).The total households in Lalo town,
Sarba, Nya’a, jeno and Amara Kucho are 425, 88, 68, 86 and 102, respectively. The total
households is 769 (513 males and 256 females) from all these five kebeles. Thus, sample
was taken from these 769 total households. Lalo Kile Woreda was purposively selected and
to select the five kebeles the researches has used simple random sampling because simple
random sampling gives equal chance for each and every kebele in the Woreda. This
technique was preferred because it is used to assist in minimizing partiality when dealing

16
with the population. With this technique, the sampling frame was organized into relatively
homogeneous groups before selecting elements for the sample. According to (M.Ruane,
2004) this step increases the probability that the final sample was representative in terms of
the stratified groups. The sampling frame was prepared from those three strata by giving
sequential order and finally a household was systematic random sampling procedure was
contacted. Five point likert scale method were used for the study to analyze the
respondents’ idea was being given in the study.

3.4.3. Sample Size

The research will use stratified random sampling techniques to select sample respondents
from the whole population which actually seven hundred sixty nine (769)(District
Adminstration, 2021).The researcher will take (131) as a sample from the total households
as per calculated by (Kothari, 2004) and three (3) individuals’ respondents was selected for
key informant interview.
Sample size determination Formula:
The sample size of the number of respondents was determined by Using Kothari (2004)
sampling design formula.
n = pq.N.Z2______
(N-1) e2 + Z2 p*q
Where n = sample size of the respondents and N = Total population of the sample size
Z = 95% confidence interval (under normal curve)
e = acceptable error (0.05)
P and q are estimated of the proportion of the population to be sample
n= {0.5) {1-0.5) (769) (1.96/(769-1) (0.05}2 + (1.95)2+ (0.5) (1-0.5)
=
377/2.8804 = 131

3.5. Data Collection Methods

Across sectional survey method was employed by using close ended structured
questionnaires among the representative of household of households in the district. Primary
data was collected with the help of structured close ended questionnaires and interview
questions that was completed by key informants (Office Managers and saving operator).

17
The questionnaires are designed to answer the questions identified in the problem statement
and include questions that are relevant to the study and were follow a logical sequence to
avoid mis understanding. Close ended questionnaires was prepared and adopted with the
context of enhance the validity, reliability and accuracy of data collected for the study. The
secondary data was collected from unpublished materials and annual report

Pilot Study

Before the actual data collection performed, pilot testing of the questionnaires was done.
(Galloway A. , 1997)Galloway suggests that a population of 5 - 10% of the final sample
size is a considerably appropriate in any pilot study. Therefore, a pilot study was conducted
among 22 village kebeles& 1 town kebele households. The reliability of variables in each
construct was confirmed through the pilot study. The improvements suggested by the
respondents on the questions and variables were incorporated in the final questionnaires and
the final questionnaires were prepared and field work was conducted.

3.6. Method of data Analysis

Descriptive method was employed to explain the demographic and socioeconomic

behavior of household characteristics .The specific methodsof data analysis involved
tabulationand cross tabulation, frequency, percentages and computationof descriptive
statistics suchasmean,and standarddeviation.After the accomplishment of the data
collection there was careful analysis and interpretation of this data, which was collected
from the respondents. The data was edited, coded, tabulated, and classified for the data
preparation.

Both descriptive and inferential statistics were used to analyze data from the field.
Descriptively, data were analyzed using tables and pie chart to group the reaction of
respondents to the questions asked. The inferential statistical tool was used to analyze the
relationship between the independent and dependent variables are the Pearson Product
moment Correlation analysis.

18
3.6.1. Model Specification

To assess the savings behavior of public sector households in Lalo Kile District the
researcher used the probit model. Using probit model the functional relationship of house
holds’ saving behavior(Yi) and its determinants can be given by:
Pr(Y=1/Xi)=Ф(α + β1SA+ β2x2+ β3x3+ β4x4+ β5x5+ β6x6 + β7x7 + β8x8+ β 9x9+
β10x10 + β11x11+ β12x12),
Where the dependent variable Y represents house holds’ saving behavior (dependent
variable), Ф is the cumulative standard normal distribution function and X1, X2,…, X13
are determinants of house holds’ saving behavior.
β1 is the partial slope for x1 on y and indicates the change in y for one unit change in x 1,
controlling x2 ……. x12 is the same thing.
X1-- Sex of the Households
X2 – Age of the Households
X3 – Marital status of the Households
X4- Education Level of the Households
X5 –Family size of the Households
X6- Service year of the Households
X7-Religion of the Households
X8-Position of the households
X9-Total Income of the Households
X10-Total Consumptions of the households
X11-Access of Formal Financial Institutions to Households
X12- Access of Training &Awareness to Households

Using the concept of latent variable(Y*), the probit model to be used to examine the
households’ decision to save is specified as:

3.7. Reliability

Reliability of data was checked by applying cronbach’s Alpha tests which measures internal
consistency or average correlation of items to judge its reliability. The reliability analysis
was used Cronbach’s alpha to evaluate internal consistency of the questionnaire. According
to (Kothari, 2004) a measuring instrument is reliable if it provides consistent results. If the

19
quality of reliability is satisfied by an instrument, then while using it we can be confident
that the transient and situational factors are not interfering.

Table 1: Reliability Test

Reliability Statistics
Cronbach's Alpha N of Items

.956 6
Source: SPSS 24 Statistics, (2021)
Thus, the composite and overall reliability of the research data found above fulfill the
criteria of greater than 0.60. On the basis of the reliability test, it was supposed that the
scales used in this study were reliable to capture the constructs and could fairly represent
the opinions of other respondents.

3.8. Validity

Validity is the strength of the conclusions, inferences or propositions. It involves the degree
to which the researcher are measuring what are supposed to, more simply, the accuracy of
measurement (Adams, Khan, Rae side, & White, 2019). Certain procedures, while
Qualitative reliability indicates that the researcher’s approach is consistent across different
researchers and different projects. The researcher will determine the validity of conclusions
through an accurate measurement process, matching the items to the research questions and
triangulating data sources.

3.9. Ethical Consideration

This study will guarantee confidentiality and secrecy to the whole participants. The names
of all the informants was coded to conceal their identity and to maintain confidentiality.
The researcher will follow appropriate way of data collection without violating cultures and
values of respondents/informants. In order to get supplementary data in depth and in width
Interview were conducted by applying 8 people was interviewed and a semi-structured
checklist to enable it to be ‘flexible, iterative and continuous.

20
 CHAPTER FOUR

4. RESULTS AND DISCUSSION

4.1. INTRODUCTION

This chapter deals with the presentation, analysis, and interpretation of the data from
primary data source. A total of 131 questionnaires were administered to sample households,
of which 131 questionnaires were completely filled by respondents and, all (12)
questionnaires were completely filled by leaders and returned. This gave a response rate of
98.85% (leader and non-leaders).
4.2. Household Demographic Characteristics

This sub-section describes the demographic characteristics of the respondents

used in the sample. The four demographic questions focused on gender, age, educational
level, and years of credit use experience. The basic characteristics of the sample population
were present in the tables below
Table 2: Gender group of household heads

Se Frequency Percent Cum.

Female(2) 43 25.94 25.94
Male (1) 88 74.06
Total 131 100 100
Source: own computation from survey data (2021)
Table 1. shows the total sample respondents (131) 88 households are male headed (67.2%)
while 43 (32.8%) are female headed. The study found that of the total participants 77% are
males while the rest 23% are females. Similarly 71% of the non-participants are males
while 29% are females. The result reveals that more male headed households participate in
microfinance institution than female headed ones.

21
 Table 3: Educational status of household heads

Educational level Percent

Illiterate 36.88
Grades 1-4 22.45
Grade5-8 21
Grades 9 & 10 complete 10
Grades 11 & 12 complete 8.13
Diploma and above 1.54
Total 100
Source: own computation from survey data (2021)
The table 2.result shows that more than half of sampled households 63.12% have attended
either formal or informal school with 43.45% households had completed at most grades 7
and 8; 10% households had completed grades 9 and 10;8.13% households had learnt
preparatory education, i.e. grades 11 and 12, and 1.54% households were diploma holders
while the remaining 36.88% of the respondents are found to be illiterate. From the total
male headed households, 69.2%households are literates while the remaining 30.8% are
illiterates meaning that they cannot, at least, read and write. Of the total female headed
households,48.2% households are literates while the remaining 51.8% are illiterates.
Table 4: Age group of the house hold heads

Age groups Percent

15-27 10
28-60 81.87
>60 8.13
Total 100
Source: own computation from survey data (2021)

The average age of the household head is 42 years with a range of 20 to 77 years. The age
structures of the surveyed household heads reveal that 7.18% of the household heads are
above the age of 64 years ( they are economically inactive), whereas the remaining 92.82%

22
household heads are on the age range of 15 to 64 years ( most probably they are
economically active).
Each household head has, on average, 2.91 economically active members with the
minimum and maximum number of zero and 8 active persons respectively, and 2.42
economically inactive members with the minimum and maximum number of zero and 5
inactive guys respectively. The mean dependency ratio of the sampled households is 1.03
with standard error of 0.07 and a 95% confidence interval of [0.9022, 1.1311]. This reveals
that we are 95% confident that every economically active individual in a household has to
support almost more than one economically inactive guy.
The average family size of the sample respondents was 5.33 and the average family sizes of
the beneficiaries and non-beneficiaries were 5.20 and 5.53, respectively. The mean
difference between the two groups was 0.33 and found to be statistically insignificant at 5%
significance level. Comparing MF participation versus non-participation in terms of
average annual expenditure on social and religious ceremonies, there is statistically
insignificant difference at 5% level of significance. With the mean difference of 0.2984579,
there is zero mean difference among MF participants and non-participation in terms of
average annual expenditure on social and religious ceremonies.
4.3. Household Resource

4.3.1. Household Landholding Size

Table 5: MF participation Distribution of the household heads by mean difference in
some selected average variables
S.No Item MF non MF Mean t-ratio for Mean
beneficiaries beneficiaries difference difference

Mean Mean
1 h_age 44 40 4 2.87**
2 Famsize 5.53 5.20 0.33 1.274
3 Sorelexp 8.4673 8.1688 0.2984 0.134
4 Inactive 2.89 2 0.89 4.093**
5 Dmfi 11.593 8.0124 3.5806 7.72*
6 Qtox 0.6993 1.5930 -0.8937 -4.70*
Source: own computation from survey data (2021)
** and * are statistically significant at 1% and 5% significance levels, respectively

23
The average land holding of the surveyed households equals to 2.63 ha with a minimum of
zero to a maximum of 14.235 ha. This figure is larger than the average national figure,
which is 1.2ha (CSA, 2008) indicating the existence of relatively higher land holdings in
the study area. Albeit this figure is over than the national average, there exists a high gap
among farmers based on their farm land holdings. The mass of farmers with small land size
are those economically active age
groups implying that large land size is owned by older ages. Land size here consists of both
cultivable and non-cultivable lands owned by the farmer. Non-cultivable lands are mostly
used for grazing and other purposes. According to the Woreda’s agricultural office of the
study area the average lands size cultivable, which is 1.04, is much less than the total
average. This indicates that farmers in the study area are smallholder farmers who operate
small lands. The main source of labour for crop production in the study area is family
labour. The average family size of the surveyed farm households equals to 5.33. This is
slightly less than the national average of 6 members (CSA, 2008).
The average number of inactive members for the sampled households (inactive) was 2.43
and this was 2 and 2.89 for the Microfinance participants and non-participant households,
respectively. The mean difference between the two groups (0.89) was found to be
statistically significant at 1% significance level. This indicates that households that have
high number of inactive members are less likely to participate in MFIs than those who have.
With regard to MFI participation the mean difference between the distance covered by
beneficiaries and non-beneficiaries is found to be statistically significant at 5 percent
probability level. Average distances to be travelled by MFIs participants and non-
participants were 8.012 and 11.593kms.This indicates that distance to be travelled to
microfinance institutions has considerable impact on farmers’ participation in MFIs.

24
4.3.2. Household Livestock Holding

Table 6: Sample households’ livestock ownership in TLU

S. Item MF non MF Mean T ratio for Mean

No Beneficiarie beneficiari difference difference
s es
Mean Mean
1 TLU 3.13 6.03 -2.9 -4.7412**
2 Qtcow 0.78 1.75 -0.96 -4.8102**
3 Qtbull 0.56 0.797 -0.27 -2.2292*
4 Qtcalf 0.071 0.22 -0.15 -4.638**
5 Qthfer 0.32 0.58 -0.26 -2.888**
6 Qtox 0.69 1.6 -0.89 -4.70*
7 QtdLaloKiley 0.168 0.34 -0.163 -2.6612*
9 Qthrs 0.138 0.28 -0.135 -2.0312*
10 Qtmule 0.046 0 .13 -0.085 -2.6944**
11 Qtchick 0.069 0.09 -0.013 -0.8061
12 Qtshgt 0.312 0.29 0.013 0.2480
Source: own computation from survey data (2021)
** and * significant at 1% and 5% levels, respectively.
Table shows 4.5 This reveals the total livestock the households own in tropical livestock
unit. It is a proxy variable for the wealth position of the households. The study areas are
mostly known by mixed crop- livestock farming. Average livestock owned in TLU by each
household equals to 4.64. The minimum and maximum livestock owned is zero and 31.85,
respectively.

4.3.3. Institutional Factors

From the total households (131),52.19%households have credit experience while the
remaining 47.81%households do not. 73.75%households have access to extension while the
rest do not have access. 17.19% households have access to irrigation while the rest do not.
75.31%households are members to social organizations such as edir, ekub, etc while the
rest are not. 28.75% households engaged on non-farm activities while the rest did not.

By kebeles, there is variation in MF participation. Overall, there exists higher Microfinance

participation in Lalo town, Jeno, Amara Kucho, Sarbaa and Nya’a, in that order. This may
be due to two facts: the first fact is the proximity to the main infrastructure and to the MFIs;

25
Jeno is very near to the Woredas followed by Amara Kucho and Sarba. The second fact is
that the majority of fewer participants are residents of Woreda who most of the time
produces crops which need less application of fertilizers such as barely, nug, and owners of
large number of Sheep and Goats. They can easily sell these sheep and goats whenever they
face some difficulties rather than running for credit. The following table summarizes
microfinance participation of sampled respondents by kebeles.
Table 7: Resource Endowment of sampled households by MF participation

Group Average Farm size(ha) t-ratio

MF non participants 1.923 (1.3663)
MF participants 3.275 (1.6671)
Difference -1.352 (2.1781) -6.2067
Group Average ox holding(TLU) t-ratio
MF non participants 0.6993464 (0.0941554)
MF participants 1.592814 (0.160296)
Difference -0 .893468 (0.1901922) -4.6977
Group Average Livestock (TLU)
MF non participants 3.126458 (0 .3080453)
MF participants 6.028407 (0.513355)
Difference -2.90195(.6120745) -4.7412
Group Average Active labour t-ratio
MF non participants 2.640523 (0.116794)
MF participants 3.155689 (0 .118906)
Difference -0 .5151657 (0.1671229) -3.0826
Group Average No of literate t-ratio
household members
MF non participants 1.666667(0.1454504)
MF participants 3.874251(0.1937222)
Difference -2.207585(0.2456619) -8.9863
Source: own computation from survey data (2021).

26
4.3.4. The Households’ Savings Behaviour

The sample households reported to have used different saving mechanisms. These include
saving at home (in boxes and underground), informal financial institutions (Edir& Ekub)
and Microfinance. The behavior of savings as responded by the sample rural households,
through the different saving methods mentioned above, shows that average annual savings
of the sample households was the largest in infor mal financial institutions (Edir &Ekub)
followed by savings at home while the least saving was in MFIs, for the year 2021. This
also holds true for beneficiaries of MFIs. The corresponding figure for non-beneficiaries
was the largest saving at home followed by saving in informal financial institutions and no
saving in Wasasa MFIs.
Mass of farmers usually makes savings at home (putting in boxes and burring underground
and/or in their own pocket). But, savings cannot be converted into investment when it is
made under such places (Rich and Olive, 2005). The survey results revealed that 35.31
percent of the respondent’s savings was at home (in boxes and underground), 52.19 percent
was in informal institutions and only 12.5 percent in Wasasa MFI for the year 2021.

According to the survey conducted, the reasons why the farming households preferred to
save more in informal institutions like edir and Ekub and at home were because of the
following reasons. First, informal savings institutions help these farmers in many ways. For
instance, with unexpected and sudden problems, these farmers get not only financial
support from such institutions but also physical assistance, .i.e. the association supports on
crop production, buildings, and so on in addition to financial support. Some preferred
savings at home or in undisclosed places because these are more readily available in their
hands. Second, farmers did not have clear awareness about the importance of financial
institutions, and the third most important reason was even though they are aware of what
financial institutions are doing, they didn’t develop confidence on them. It is about security
and trust.

27
4.3.5. Households Savings in Informal Financial Institutions

The rural community practices some indigenous traditional savings arrangements on the
basis of cooperative like traditional associations. The most common ones in Ethiopia are
called Ekub and edir. Ekub is a form of savings association in which every member is
expected to contribute a fixed amount of money either weekly or bimonthly or monthly and
a fixed sum is exchanged for the privilege of receiving a large sum at some point on
rotational basis through a lot. The survey result revealed that 52.20% of the respondents’
savings were in informal financial institutions and they saved biweekly or monthly.
Between the two sample groups there was no significant difference in their traditional
savings behavior. Although relevant collected data revealing amounts saved by each
respondent was unavailable, the survey result shows that savings through traditional
associations such as Ekub and Edir are common practices in the study area.

4.3.6. Sample Respondents’ Savings Behavior in MFIs

Comparing those with good outlook versus those with bad outlook on savings in MFIs in
terms of average distance in km to be travelled to get financial products and services from
different financial institutions, there is statistically significant difference in distance at 5%
level of significance. With the mean difference of 2.35 and probability Pr (T < t) = 0.0000
(Ha: diff ≠ 0) we have evidence to say that p-value is less than 0.05 significance level and
hence, there is statistically significant difference in average distance among the two groups.
The average distance is 8.42 and 10.77 kilometers for those with good outlook and with bad
outlook on savings in MFIs, respectively. Thus, distance from MF institutions highly
influences the households’ attitude towards savings in the study area.

In terms of average age, there is still statistically significant difference among those with
good outlook and with bad outlook. The mean age difference of -3.76 and the probability of
Pr(|T|>|t|) = 0.0055 (for Ha: diff ≠ 0) reveals the existence of mean difference among the
two groups at 5% significance level. The average age is 44.10 and 40.34 for those with
good outlook and with bad outlook, respectively.
In terms of average social and religious expenditure, there is statistically significant
difference among those with good outlook and with bad outlook. The mean difference of -

28
5.34 and probability Pr(|T|>|t|) = 0.0160 (for Ha: diff ≠ 0) reveals the existence of mean
difference among the two groups at 5% significance level. The average social and religious
expenditure is 5.341 and 10.681 for those with good outlook and with bad outlook,
respectively.
Comparing those with good outlook versus those with bad outlook on savings in terms of
average land holding, there is statistically significant difference in land holding. The null
hypothesis given as Ho: diff=mean (0) – mean (1)=0 is rejected at 5% level of significance
and 318 degrees of freedom against the alternative hypothesis Ha: Ho is not true. With the
mean difference of -0.853 and the probability of Pr (T < t) = 0.0002 (Ha: diff ≠ 0), we can
see that p-value is less than 0.05 significance level and hence, there is statistically
significant difference in average land holding among the two groups. The average land
holding is 3.103 and 2.250 ha for those with good outlook and with bad outlook,
respectively.
The survey result reveals that, the average number of literate household members is 3.401
and 2.354 for those with good outlook and with bad outlook on savings in MFIs,
respectively. With a mean difference of -1.047 and the probability of Pr(|T| > |t|) = 0.0001,
we can conclude that there is statistically significant difference in average number of
literate members among the two groups at 1%, 5%, and 10% significance levels with 318
degrees of freedom.

Those with good attitude on saving in MFI have more livestock than their counter parts.
Taking the one tailed t-test : Ha: diff < 0 , the probability Pr(T < t) = 0.0915 shows that the
mean difference is statistically significant at 10% significance level with 318 degrees of
freedom, so, the null hypothesis Ho: diff = mean(0) - mean(1)=0 is rejected at 10% level of
significance while the alternative hypothesis with one tailed is accepted at the 10% level of
significance with probability Pr(T < t) = 0.0915 less than level of significance. Average
livestock owned by those with good attitude on saving in MFI and with bad attitude on
saving in MFI are approximately 5.112 and 4.265, respectively.

29
4.3.7. Analysis of Empirical Data

4.3.7.1. Independent Variables Analysis

The first objective of the research study was to determine the influence of Microfinance
practices on saving financial performance of House hold saving in Lalo Kile woreda.
Causal research design was adopted for the study; the target population comprised of
131 respondents.
The effect of Live Stock owner ship on saving financial performance . Results are shown in table
below
Table 8: Extent to Live Stock owner ship
Number of clients /house hold/ Frequency Percentage
Very great extent 20 12.7
Great extent 80 67
Moderate extent 31 20.3
Total 131 100
Source: Survey Result, 2021
The study required to decide the extent to which MFIs used to Live Stock owner
ship from the findings 67% of the respondents indicated to a great extent, 12.7 % of the
respondents indicated to a very great extent, 20.3% of the respondents indicated to a
moderate extent whereas this implies that Lalo Kile woreda House Hold Saving used
Live Stock owner ship in saving financial performance to a great extent.

30
 Table 9 : Level of Live Stock owner ship
Statements

deviation
Disagree

Disagree
Strongly

Strongly
Neutral

Agree

Mean
agree

Std.
Livestock viable strategy 8 23 26 70 31 2.89 .847
were improve saving
management.
Accepting Livestock owner 14 19 26 67 32 2.98 .769
ship macanizem has change
society
Livestock ownership one 12 15 18 53 60 3.01 1.049
of saving method for
changing .
Livestock does help the 16 14 29 32 69 3.36 .878
Economy of society
Source: Survey Result, 2021
The study shows to found the level at which respondents agreed or disagreed
with the above statements relating to Livestock viable strategy were improve saving
management shows by mean 2.89 Accepting Livestock owner ship macanizem has change society
house hold as shown by mean of 2.98 , Livestock ownership one of saving method for
changing as shown by mean 3.01 and Livestock does help the Economy of society as shown by
mean 3.36 Was a workable strategy for saving Financial performance as shown by a mean
of 3.36.
The mean and the standard deviation scores have been computed for all the Four items of
customer’s perceived on Live Stock owner ship. Respondents were asked a number of
questions and were supposed to rate them with the highest being strongly agree (5) and the
least being strongly disagree (1). Hence, four questions of effect of Livestock does help the
Economy of society mean score of the response ranges from 2.89 - 3.36 which is under the
category of strongly agree and agree according to the above assumption.

31
4.3.7.2. Land Holding

The second objective of the study was to establish the effect of Land size Holding on house hold
saving financial performance in Lalo Kile Woreda . Results are as shown in table 10 . below.

Table 10: The Extent of Land Holding House Hold head

Number of respondent Frequency Percentage

Very great extent 70 44.3

Great extent 53 33.5
Moderate extent 35 22.2
Total 131 100
Source: Survey result, 2021
The study shows to decide the amount to which MFIs used Extent of Land size Holding
House Hold head from the findings 44.3 % of the respondents indicated to a very great
extent, 33.5 % of the respondents indicated to a great extent whereas 22.2% of the
respondents indicated to a moderate extent, this implies that MFIs used Extent of
Land Holding House Hold head to a very great extent
Table 11 : Level of Land Holding
Statement
dis .agree
Strongrly

deviation
Disagree

Strongly
Neutral

Agree

Mean
agree

Std
Available Land Size have assisted towards 7 16 20 44 44 2.89 .917
efficient in saving performance.
To Having Land size change Financial 11 25 21 38 36 2.98 .877
Performance of House hold.
Enforcement of Land policies provides 5 20 6 56 44 3.04 .836
chances for improving loan recovery .
Land Size Have Change Economy 6 15 10 60 40 3.50 .940

Regular reviews have been done on Land 9 15 7 52 48 3.17 .714

Size to improve state of Saving House hold

Source: Research findings, 2021

The results in table above show that regular reviews have been done on Available Land
Size have assisted towards efficient in saving performance 2.89 , To Having Land size
change Financial Performance of House hold. as shown by mean of 2.98, Enforcement of

32
Land policies provides chances for improving save recuperation was shown by mean of
3.04, , Land Size Have Change Economy was shown by mean of 3.50 and Regular
reviews have been done on Land Size to improve state of Saving House Hold as shown by
mean of 3.17 .
The mean and the standard deviation scores have been computed for all the Five items of
variable’s superficial on Land size . Respondents were asked a number of questions and
were supposed to rate them with the highest being strongly agree (5) and the least being
strongly disagree (1). Hence, five questions of effect of Land size on financial performance
House Hold Saving were asked to gather information in the above table indicating the mean
score of the response ranges from 2.89 -3.50 which is under the category of moderate
extent and very moderate extent according to the above assumption
Loan Size
Table 12: Extent to Loan Size in affect saving performance practice
Number of respondent Frequency Percentage

Very great extent 60 42.4

Great extent 47 36
Moderate extent 24 21.6
Total 131 100
Source: Survey Result, 2021
The study sought to decide the degree to which Loan Size in saving performance,
from the result 42.4 % of the respondents indicated to a very great extent, 36.0% of the
respondents indicated to a great extent whereas 21.6% of the respondents indicated to a
moderate extent, this implies that Lalo Kile woreda Loan Size had Financial performance
practice was a very great extent

33
 Table 13 : Level of Loan Size

Statement

Stddevia
Disagree
Strongly

Strongly
disagree

Neutral

Agree

Mean
agree

tion
posing loan size limits is a viable strategy 10 11 24 55 58 2.97 .831
in credit management
The use of credit checks on regular basis 9 15 19 77 38 2.99 .965
enhances credit management.
Flexible repayment periods improve loan 8 11 21 49 69 3.25 .835
repayment.
Penalty for late payment enhances 5 18 46 71 3.31 .885
customers commitment to loan repayment 18
The use of customer credit application 11 18 81 32 3.18 .899
forms improves monitoring and credit 16
management as Well
Source: Survey Result, 2021

From the above answer, the study recognized that majority of the respondents strongly
agreed that posing loan size limits is a viable strategy in credit management as shown by
mean 2.97,and The use of credit checks on regular basis enhances credit management.
as shown by a mean of 2.99 and Penalty for late payment enhances
customers commitment to loan repayment as shown by mean 3.31 , The use of Flexible
repayment periods improve loan repayment forms improves monitoring and saving
management as Well as shown by a mean 3.25 .
The mean and the standard deviation scores have been computed for all the Five items of
customer’s perceived on Loan Size. Respondents were asked a number of questions and
were supposed to rate them with the highest being strongly agree (5) and the least being
strongly disagree (1). Hence, five questions of effect of Loan on financial performance
were asked to gather information in the above table indicating the mean score of the
response ranges from 2.89-3.25 which is under the category of moderate and very great
extent according to the above assumption.

4.3.7.3. Saving Culture

Development House Hold saving culture Financial performance was the exceptional
combination of its saving values, beliefs, practices and management attitudes, which
defines that in cash and in kind determines the saving behavior acceptable to the
Development Financial performance practices. The Forth objective of the study was to

34
determine the effect of Saving culture of financial Performance on House Hold Saving
in selected Lalo Kile woreda. The results are as shown in table 13 below

Table 14: Extent of Saving culture House Hold

Number of creditor/house holds Frequency Percentage

Very great extent 60 44.3
Great extent 50 37.9
Moderate extent 21 17.8
Total 131 100
Source: Survey Result, 2021

The study sought to determine the extent to which Lalo Kile Woreda House Hold
Saving culture in the District, from the findings 44.3 % of the respondents indicated to a
very great extent, 37.9% of the respondents indicated to a great extent whereas 17.8% of
the respondents indicated to a moderate extent, this implies that Lalo Kile Woreda Saving
culture practice to a very great extent
Table 15 : Level of Saving culture

Agre
Neut

Mea
ngly

ngly
gree

devi
Stro

Stro

ated
disa

Std.
Statement
ral

n
e
The communication of House holds Saving 15Culture
16 23 40 37 2.98 .690
and their businessplan and incentive plan
should be consistent to eliminate changing Economy.
Saving Culture should be in a clear, 5 14 12 44 36 2.94 .943
format and enforced by an authority
who is independent of the business
origination function changing house
hold saving.
Clear accountability should be 9 11 11 58 32 3.21 .811
established for every personnel
involved in the management of saving
Culture.
Accepting responsibility for saving 5 10 16 64 36 3.50 1.011
culture quality and encourages
financial performance of Individual .
There should be strong saving Culture 9 11 11 55 45 3.40 .865
in the society level .
Source: Survey Result, 2021
The result in the above table point out as show by mean The communication of House holds
Saving Culture and their business plan and incentive plan should be consistent to eliminate

35
 changing show by mean 2.98 Saving Culture should be in a clear, format and enforced by an
authority who is independent of the business origination function changing house hold saving
show by mean 2.94 ,
Clear accountability should be established for every personnel involved in the management
of saving Culture show by mean 3.21 Accepting responsibility for saving culture quality and
encourages financial performance of Individual show by mean 3.50 and
There should be strong saving Culture in the society level 3.40

The mean and the standard deviation scores have been computed for all the five items of
customer’s perceived on Saving culture. Respondents were asked a number of questions and
were supposed to rate them with the highest being strongly agree (5) and the least being
strongly disagree (1). Hence, five questions of effect of credit culture on financial
performance were asked to gather information in the above table indicating the mean score
of the response ranges from 2.94 – 3.40 which is under the category of Agree and strongly
agree according to the above assumption.
Table 16: Level of Marital Status

Agre
Neut
Disa
ngly

ngly
Mea
gree

devi
Stro

Stro

Std.
Statement
ral

n
e
How do you think few family have been 16 25 20 41 29 2.98 .992
communication of credit standards,
credit policy, business plan very great
change on sassing Financial Performance
practice.
Marital status have good deliver Financial 4 6 12 76 33 3.24 .677
performance of saving.

Clear accountability in Marital status should 16 25 20 76 33 3.48 .923

be established for every personnel involved
in the management of saving.
If marital status united together accepts 7 8 16 64 36 3.38 .872
responsibility for saving can change their
Economy .
There should be strong management at the 6 9 39 47 31 2.99 .864
top of the Family make sustainable
Financial performance .
Source: Survey Result, 2021
The result in the above table point out as majority of respondents strongly agree on “There
should be strong management at the top of the Family make sustainable Financial

36
performance and Clear accountability in Marital status should be established for every
personnel involved in the direction of saving.. In addition the few family have been
communication of recognition standards, , business plan very great change on assess
Financial Performance, Marital status have good deliver Financial performance of reduction
as well as marital status united together accepts responsibility for saving can change their
Economy . and
The mean and the standard deviation scores have been computed for all the five items of
customer’s apparent on Marital status Saving . Respondents were asked a number of
questions and were supposed to rate them with the highest being strongly agree (5) and the
least being strongly disagree (1). Hence, five questions of effect of saving culture on
financial performance were asked to gather information in the above table indicating the
mean score of the response ranges from 2.98- 3.48 which is under the category of agree and
strongly agree according to the above assumption.

4.4. Productivity and Efficient

Measuring the productivity and efficiency is helpful to assess the competence of
Hous hold saving to generate revenue and resource use ability to wealth maximization.
Provision of financial services and products at the least amount cost possible is the proverb
of resourceful service delivery (Befekadu, 2007). The competence ratio is the case of House
holds saving focuses on the capacity of individual and group members . The efficiency
ratio measures the ratio or percentage of operating and personnel expense relative to loan
portfolio (Bamlaku, 2006). The lower operating expense ratio indicates the lower
expense relative to portfolio outstanding. Usually costs of credit expenditure are
higher than costs of accepting saving deposits.
The efficiency ratios include operational costs ratio, cost per unit of currency hand,
cost per borrower. As a base operating cost ratios of 13% and 12% is a good indicator for
successful MFIs (Ledgerwood, 1999)

37
 Table 17 : Descriptive Analysis of Independent Variable Dimensions Statistics

Mea Std. Varianc

Reliability
n Deviation e
Livestock Available strategy were improve saving 2.89 .847 .718
management.
Accepting Livestock owner ship macanizem has change 2.98 .769 .592
society
Livestock does help the Economy of society 3.01 1.049 1.100
Livestock viable strategy were improve saving 3.36 .878 .770
management Livestock ownership one of saving method
for changing ..
Livestock ownership was best for change our life. 3.37 .970 .942
Available Land Size have assisted towards efficient in 2.89 .917 .841
saving performance.
To Having Land size change Financial Performance of 2.98 .877 .769
House hold..
Enforcement of Land policies provides chances for 3.04 .836 .699
improving loan recovery .
Regular reviews have been done on Land Size to improve 3.50 .940 .883
state of Saving House Hold
Land Size Have Change Economy 3.17 .714 .510
A Loan size is more effective in saving culture 2.97 .831 .691
posing loan size limits is a viable strategy in credit 2.99 .965 .931
management
The use of credit checks on regular basis enhances credit 3.25 .835 .698
management.
Flexible repayment periods improve loan repayment. 3.31 .885 .783
Penalty for late payment enhances customers commitment 3.18 .899 .807
to loan repayment
The communication of House holds Saving Culture and 2.98 .690 .477
their business plan and incentive plan should be consistent
to eliminate changing Economy.
Saving Culture should be in a clear, format and enforced by 2.94 .943 .889
an authority who is independent of the business origination
function changing house hold saving.
Clear accountability should be established for every 3.21 .811 .657
personnel involved in the management of saving Culture.
Accepting responsibility for saving culture quality and 3.50 1.011 1.021
encourages financial performance of Individual .

38
 There should be strong saving Culture in the society level 3.40 .865 .749
There should be strong management at the top of the credit 2.99 .864 .746
function
Marital status have good deliver Financial performance of 2.98 .992 .984
saving.
How do you think few family have been communication of 3.24 .677 .459
credit standards, credit policy, business plan very great
change on sassing Financial Performance practice.
Clear accountability in Marital status should be established 3.48 .923 .852
for every personnel involved in the management of saving.
If marital status united together accepts responsibility for 3.38 .872 .761
saving can change their Economy .
There should be strong management at the top of the Family 2.99 .864 .746
make sustainable Financial performance .
Over all house hold(mean) 3.29 .759 .577
Source :SPSS 2021
Table 18: Response of Respondents of OCSSCO credit staff and manager on Financial
Performance by using Likert scale is has below

Indicators 2017 2018 2019 2020 2021

Borrowers per staff 232.06 219.73 181.93 201.4 198.66
Borrowers per CSO 3481 3296 2729 3021 2980
Operatingexpense/ 5% 5.60% 6.8% 7.9% 8.4%
loan portfolio
Cost per borrower 173.75 189.01 295 409 534.06
loans per staffs 1,055,349.06 1,085,526.66 1,098,860 1,542,220 1,714,8
93
loans per CSO 15,830,236 16,282,900 16,482,900 23,133,300 25,723,
400

Source: Performance report 2017-2021(OCSSCO)Lalo Kile Woreda

Efficiency and productivity indicators examine the intent by which company deliver
full financial service in the most cost effective manner while maximizing their
services using a nominal amount of resources. From the above table the researcher
evaluating OCSSCO in case of Cost per borrowers increased from years 2017-2021 this
indicate the cost incurred for serve a single active borrow. It informs company how much
it must earn from each client to profitable. On average OCSSCO incurred expense for each
client borrow 320.30 per client borrower. However, on average it cost Ethiopia micro

39
finance institutions birr 206 to serve a client (AEMI Bulletin, 2010). From this what we
observed that OCSSCO the cost incurred for each client high because of increased
personnel expense and administrative expense incurred to serve the client. In addition to
this Operating expense per loan Portfolio increased from 5% to 6.80% this indicate that
controlling cost with increased with portfolio un efficient.

4.5. Profitability

Profitability is the ability of an organization to generate earning and make a profit and
provides an insight into the degree of success of the owner`s investment (Atrill and
Mclaney, 2004). Profitability indicators measure financial performance of a firm over a
period of time. It is useful for both internal and external stakeholders to assess profitability
of the business. To show the profitability of the institution ROE(return of equity),
ROA(return of asset), Yield on Portfolio and Profit Margin rations are used. Return of
Assets (ROA) Measures the average net income earned on a single currency owned and
indicators the kinds of return the assets are generating .High return implies good
utilization of assets. Return of Equity (ROE) refers to the maximum return available
to shareholders. ROA gives the rate return earned on net worth or equity invested.
High return implies happy shareholders or owners. Yield on portfolio measures the
percentage of net income for every birr in portfolio.

Table 19 : Table of productivity and efficient of Lalo Kile Woreda OCSSCO .

Indicators 2017 2018 2019 2020 2021
ROA 3.5% 4% 4.70% 6% 5.50%
ROE 17% 15% 18% 23% 19%
Yields on gross portfolio 14.90 14.80 15.50 0.20 0.20
Net profit 106,297 124,729 178,447 279,113 283,794
Source: Independent Auditor report 2017-2021(OCSSCO)Lalo Kile Woreda
As the table presented in the above most of indicators of portability was increase and this
indicate that the sustainability of the company. When the researcher discussed in
each of indicators of profitability in the above table from 2017 years up to 2021 fiscal
year . ROA was a measures of how well uses its assets to generate return in order to
get profitability of the company in this cased OCSSCO Return on assets increased from

40
year to year what we observed and concluded that OCSSCO used its assets to generate
return . In addition, ROE also increased from 2017-2021 year .i.e. 17% to 19 respectively.
it was indicate the Return of Equity of the OCSSCO more profitable regardless of
underling`s funded financial structure and Yields on gross Portfolio also increased in
past of years in OCSSCO .this indicate that the ability to generate cash from interest, fees
and commissions on the gross loan port folio. The study sought to establish whether
there was linearity between independent and dependent variables

4.6. Inferential Statistics

Inferential analysis was conducted to generate correlation results, model of fitness, and
analysis of the variance and regression coefficients.

4.7. Correlation Analysis

Results are said to be significant if the P – value is above 0.05 (Bland & Altman, 1995).
Table 19 below presents the results of the correlation analysis. The results revealed that are
significantly related and have weak positive correlation (r=0.343,p=0.009).
These findings agreed with that of institute a positive relationship between Livestock, Land
size holding, Loan Size, Saving Culture and Marital status The findings also agreed with
that of World Vision MFI.org (2010) who found that house hold saving have a positive
effect on financial performance of deposit taking MFIs.
The Table indicates that Livestock and Land size holding, unit are significantly related
and have moderately strong positive correlation (r=0.501, p=0.000).source SPPS 2021. It
was established that Livestock and Land size holding were significantly related and have
strong positive correlation. (r=0.000, p=0.013). Similarly, results showed that performance
of house hold saving were significantly related and have moderately strong positive .
The average values of the data results are sets on table blow.

41
 Table 20: Correlation Analysis

Correlations
Livestock Land Loan Savi Mari Househ
ownershi size size ng tal old
p holding Cult statu saving
ure s
Livestock Pearson 1
ownership Correlation
Sig. (2-tailed)
Land size Pearson .936* 1
holding Correlation
Sig. (2-tailed) .019
Loan size Pearson .374 .528 1
Correlation
Sig. (2-tailed) .535 .360
Saving Pearson .644 .821 .898* 1
Culture Correlation
Sig. (2-tailed) .240 .089 .039
Marital Pearson .627 .797 .924* .998* 1
status Correlation *

Sig. (2-tailed) .257 .106 .025 .000

Household Pearson .999 **
.920 *
.340 .609 .593 1
saving Correlation
Sig. (2-tailed) .000 .027 .575 .276 .292
N 5 5 5 5 5 5
*. Correlation is significant at the 0.05
level (2-tailed).
**. Correlation is significant at the 0.01
level (2-tailed).
Source: Survey Result, 2021

As it can be seen from the above table , to determine the relationship between
the Livestock ownership Land size holding ,Loan size, Saving culture and marital
status ,Pearson correlation was computed. The results of Pearson correlation on
relationship between Livestock and Land size holding indicated in the above table .

According to the above table , there is a moderate correlation between Live stock
ownership (0.000) and Land size holding (0.027) followed by saving culture (0.276), and

42
the other two marital status dimensions (0.292 )Loan size (0.575) were positively
correlated.

In general, there is in significant relationship between the independent variables and dependent
variable
Finally, the relationship between the overall Livestock ownership and Land size holding
is also analyzed using a correlation analysis. The result shows that ,the rest such as Loan
size, Saving culture and marital status dimensions have positive relationship(correlated) .
The above Table were shows also Correlation is significant for livestock owner ship at the
(0.000) level, Correlation is significant for Land holding size at the (0.027)level, Correlation
is significant for loan size at the (0.575) level and for saving culture is significant at (0.276),
marital status dimensions (0.292 )

Results are said to be significant if the P – value is above 0.05 (Bland & Altman, 1995).
The Table above presents the results of the correlation analysis. The results revealed that
credit policies and financial performance are significantly related and have weak
positive correlation (r=0.343,p=0.009). These findings agreed with that of Agola(2014)
found a positive relationship between Livestock, Land size holding, Loan Size, Saving
Culture and Marital status .

4.8. Regression Analysis

In statistical modeling, regression analysis is a statistical process for estimating the

relationships among variables. It includes many techniques for modeling and analyzing
several variables, when the focus is on the relationship between a dependent variable
and one or more independent variables (or 'predictors'). There are various assumptions
for multiple linear regressions. First it needs the relationship between the independent and
dependent variables to be linear. Secondly, the multiple linear regression analysis requires
all variables to be normal. Thirdly, multiple linear regressions assume that there is little
or no multicollinearity in the data. The results presented in Table 19 present the fitness of
model used in the regression model to explain the study phenomena. Credit appraisal, credit
risk control ,collection policy and credit culture Financial performance practices provides a
moderately good fit in predicting changes in financial performance of Lalo Kile OCSSCO.

43
4.9 Linearity

Linearity means that the predictor variables in the regression have a straight-line
relationship with the outcome variable.

4.9.1. Linearity test

Source: SPSS output result (2021)

Figure ii: Linearity test

4.9.2. Normality

44
Normality is a situation where everything is normal or as we would expect it to be. (Oxford
Advanced learners’ Dictionary 6th Edition.)

In order to make valid inferences from regression, the residuals of the regression should
follow a normal distribution. The residuals are simply the error terms, or the differences
between the observed value of the dependent variable and the predicted value. If we
examine a normal Predicted Probability (P-P) plot, we can determine if the residuals are
normally distributed.
4.9.3. Normality Test
Parametric data are assumed to be normally distributed the normal distribution
(approximated mathematically by the Gaussian distribution) is a data distribution with
more data values near the mean, and gradually less far away ,symmetrically. To sensibly
justifyapplyingparametricteststhedatashouldbenormallydistributed.

The histogram shown in figure above indicates shape of Approximately normal curve. It
shows normal distribution of data and fulfills normality distribution test.

45
 4.9.4. Multicollinearity

In a multiple regression model two and above predictor variables are analyzed
against independent variable to see their statistical implication of various values. But the
analysis of this sort could have Multicollinearity (Co linearity) phenomenon in which two
or more predictor variables are highly correlated to the extent that one variable can be
linearly predicted from the others with a substantial degree of accuracy. The test of
Multicollinearity is detected by Tolerance and Variance inflation factor (VIF )result.

From Multicollinearity point of view, tolerance is an indicator of how much of the variability
of the specified independent variable is not explained by the other independent variables
in the model. It is calculated using the formula 1- R squared for each variable. If this value
is very small that it is less than 0.10, then multiple correlations with other variables is high,
suggesting the existence of Multicollinearity.

Variance inflation factor (VIF) is the inverse of the Tolerance value i.e., 1 divided by
Tolerance (1/1-R).VIF values above 10 implies the existence of Multicollinearity between
variables. In summary, there is no Multicollinearity problem when the tolerance values of
all independent variables and the VIF are above 0.1 and below 10 respectively which can be
taken as a green light for the researcher to precede the task of multiple regressions.

The following table.14 presents the results of multiple regressions analysis. Here the
squared Multiple correlation coefficients(R 2) which tells the level of variance in
the dependent variable( customers’ satisfaction) that is explained by the model.

46
 Table 21: Summary of multiple regression analysis

Coefficientsa
Model Unstandardized Standar T Sig. 95%Confidence Collinearity
Coefficients ed Interval for B Statistics
Coeffici
es
B Std.Er Beta Lower Upper Toler VIF
or Boun Bound ance
d
1 (Constant) -.306 .000 2.52 0.013 -.306 -.306

Livestock .899 .000 .942 4.57 0.000 .899 .899 .022 45.681
ownership
Land size .267 .000 .251 2.918 0.004 .267 .267 .005 206.950
holding
Loan size .400 .000 .263 2.85 0.005 .400 .400 .007 139.503
Savingculture .027 .0872 0.0154 .5798 .3284. .292 3.422 .027 .0872

Marital status -.456 .000 -.442 1.08 0.27 -.456 -.456 .003 334.016
a. Dependent Variable: Household saving

Source: Survey Result, 2021

The Table shows the standardize beta coefficient, which tell us the unique contribution of
each factor to the model. A high beta value and a small p value (<.005) indicate the
predictor variable has made a significance statistical contribution to the model. On the
other hand, a small beta value and a high p value (p >.005) indicate the predictor variable has
little or no significant contribution to the model. Ggorge et al. (2003). The results
indicate that Livestock owner ship, Land size holding, Loan size .Saving Culture and Marital
status dimension of service quality have insignificant effect on customers’ satisfaction at 95%
confidence level. But, the result of beta value shows positive increment under Livestock owner
ship, Land size holding and Loan size which was 0.899 ,0 .267 and 0.400 respectively. This
shows that those Livestock owner ship, Land size holding and Loan size has greater effect on
House Hold Saving than Marital status and Saving culture which shows negative increment
(-0.0014, -0.456 )respectively on house hold saving . The result of this study indicates that
all predictor variables house hold saving dimensions that make a statistically insignificant
contribution on combined effect the house hold saving.

47
 The multiple regression equation formula
Y = β0 + β1X1 + β2X2+……+ βnXn
Where: Y = dependent variable β0 = constant βn = Unstandardized regression
coefficient X = Value of the predicted coefficient Y = β0 + (β1) X1+ (β2) X2 + (β3)
X3+ (β4) X4+ (β5) X5+E error
Where: β0= 0.899 X1=0.267, X2=0.400, X3=-0.456, X4=and X5= 0.27 +E error
Y = -0.899+ 0.267X1+( 0.400X2 )+( -0.456X3 )+(-0.456X4) X5+(0.75)e
The regression equation above shows that, by taking all factors into account constant at
zero, the House hold saving will have a value of 0.899. The findings presented also show
that taking all other independent variables at zero, a unit increase in House hold saving
would lead to a 0.267 in the land holding, a unit increase in maternal status would lead to a
-0.456 increase in the House hold saving, a unit increase in loan size would lead to a 0.400
increase in the house hold saving ,

The coefficient of determination(R square) indicates the extent to which changes in the
dependent variable can be explained by the changes in the independent variables; or, the
percentage of variation in the dependent variable (House Hold Saving) that is explained by
all the independent variables (Livestock owner ship, Land size holding and Loan size .
According to the table above, only 87.6% of the dependent variable (House Hold saving) is
determined by the five independent variables, and the remaining 12.4% is determined by
other factors which are not included in this research and need further study by other
researchers.

4.9.5. Hypothesis Test

According to Weiers (2008), stated that, in testing hypothesis, if p- value is less than the
specific level of significance, then reject the null hypothesis and accept the alternate
hypothesis. Based on this guideline, the researcher used the Pearson’s correlation
coefficients between independent variables and the dependent variable.

48
HO1: There is no significant relationship between Livestock ownership and House
saving
The Livestock in general affects the House hold saving of Lalo Kile woreda . The Pearson
correlation coefficient between Livestock ownership and Land size Holding is 4.57 at p =
0.000 which is the value of “P” greater than 0.05 and the relationship is positive.
Furthermore, the result in regression analysis indicates that Livestock ownership is in
significant effect House hold saving as the value of “P” is insignificant (t=4.57, p=0.000
which is greater than 0.05 and coefficient of β=0.899).this shows that one unit increase in
Livestock owner ship explains 0.899 in customers’ satisfaction.
HO2: There is no significant relationship between Land size holding and House Hold
Saving The result in regression analysis indicates that Land size holding insignificantly
effects on House hold saving as the value of “P” is insignificant (t=2.918, p= 0.004 which
is less than 0.05, and coefficient of β=0.207). This shows that one unit increase in saving
explains 0.207 in House Hold saving, which means al, have significant effect on House
Hold saving
HO3: There is no significant relationship between Loan size and House Hold Saving
The Pearson correlation coefficient between Loan size and House Hold Saving is 0.400 at
p = 0.005 which is the value of “P” less than 0.05 and the relationship is positive. The
table of significance of regression coefficients in table above shows that, coefficients of
β=-0.400, p =0.005 (the value of “p “is less than0.05).And this shows that one unit
increase in Land size explains 0.400 in House hold saving.
HO4: There is no significant relationship between Marital status and House Hold
Saving
The Pearson correlation coefficient between Marital status and House Hold Saving
is -0.003 at p = 0.27 which is the value of “P” less than 0.05 and the relationship is
positive. The study also revealed that there was positive relationship between Marital status
and House Hold Saving because the value of “β”= -0.-0.456 and “p” = 0.27 which means
the correlation was insignificant at 0.05 significant level (2-tailed). And this shows that one
unit increase in marital status -0.456 in House Hold Saving.

49
HO5: There is no significant relationship between saving culture and House Hold saving

The study revealed the result of multiple regression analysis between dependent variable
(House Hold saving) and independent variables (saving culture). The study revealed that the
Pearson correlation coefficient between saving culture and the house hold saving is -0.756
at p = 0.139 which is the value of “P” greater than 0.05 and the relationship is negative
Besides, empathy has insignificant level when p = 0.139 (p>0.05) and coefficient of β=
-0.027. This shows that one unit increase in empathy explains -0.027, this shows that one
unit increase in empathy explains -0.027 on customers’ satisfaction. .

This regression analysis is conducted to know by how much the independent variable
explains the dependent variable. The regression was conducted between independent
variables (Livestock owner ship, Land size holding, Loan size ,Saving Culture and Marital
status ) and dependent variable of House Hold Saving. The researcher used a multiple linear
regression which seeks to predict an outcome from several predictors. The purpose of
regression analysis is used to analyze the relationship between independent variables and
dependent variable. If there is a relationship, using the information in the independent
variables will improve our accuracy in predicting values for the dependent variable. In this
section the researcher tried to identify the very significant factors that have effects on
House Hold Saving in Lalo Kile Woreda MFI. Additionally square tells us how much of the
variance in dependent variable is accounted for by the regression model from our sample,
the adjusted value tells us how much variance in dependent variable would be accounted for
if the model had been derived from the population from which the sample was taken (Field,
2006). Regression coefficients (R) and R Square of the research are discussed below:

50
 Table 22: Model summary

Model Summaryb
Mod R R Adjuste Std. Error Change Statistics Durbin-
el Squar dR of the R Square F Change Sig. F Watson
e Square Estimate Change Change
1 .838a .702 .628 .463 .702 9.442 .000 2.085
Source: Survey Result, 2021

Source: Survey result (2021)

The result of multiple regressions displayed in above table model summery shows a highly
significant relationship (p< .000) between the dependent variable and the linier combination
of the predictor variables as indicated by multiple R (0.838). The coefficient of
determination (R Square = 0.702) is a measure of how good a prediction of the criterion
variable we can make by knowing the predictor variables.
Accordingly, 62.8 % of the variation in the dependent variable was explained by the set of
mentioned independent variables. However, R-squared measures the proportion of the
variation in the dependent variable explained by independent variables, irrespective of how
well they are correlated to the dependent variable. Conversely, adjusted R-squared provides
an adjustment to the R-squared statistic such that an independent variable that has a
correlation to dependent variable increases adjusted R-squared and any variable without a
strong correlation would make adjusted R-squared decrease. Therefore, to see the success
of our model in the real world adjusted R-squared is more preferred than R-squared (Burns,
2007). According to adjusted R-squared, the variation explained by the regression of
dependent variable on the combined effect of all the predictor variables is 62.8%.
From the results in table above, the simple correlation coefficient (r) indicates the nature
and strength of relationship between the study variables. The study finds a strong
positive relationship between the study variables as shown by 0.990. Adjusted R-squared
is 0.702 indicating that 98.1% variation of economic performance of House Hold
Saving is endorsed to changes of Livestock owner ship ,Land Size, Loan size, Saving
culture and Marital status remaining 1.9% is attributed to other factors beyond the scope of
this study.
The results indicate that the overall model provided a relatively good fit. Further, the results
imply that the independent variables (Livestock owner ship ,Land Size, Loan size, Saving

51
culture and Marital status) are good predictors of economic performance House hold
saving. This was supported by an F statistic of 1979.664 and the reported p value (0.000)
which was less than the conventional probability of 0.05 significance level. Livestock
owner ship and Land size holding. The findings also agreed with that of WVMF .org.(2010)

4.9.6. Data Validity and Reliability

The reliability of a research instrument concerns the extent to which the instrument yields
the same results on repeated trials. Although unreliability is always present to a certain
extent, there would generally be a good deal of consistency in the results of a quality
instrument gathered at different times. The tendency toward consistency found in
repeated measurements is referred to as reliability (Carmines and Zeller, 1979).
The most popular internal consistency reliability estimate is given by Cronbach’s alpha. It
is expressed as alpha = Np/ [1+p (N-1)] Where N equals the number of items and p equals
the mean inter item correlation. Validity is defined as the extent to which the
instrument measures what it purports to measure (Allen and Yen, 1979). Content
validity pertains to the degree which the instrument fully assesses or measure the construct
of interest.
The questionnaire was carefully designed and tested with a few members of the population
for further improvements.

4.9.7. Test of Autocorrelation Assumption

Autocorrelation assumption (Durbin-Watson) is the assumption of independent error

reasonable test. This assumption can be tested with the Durbin-Watson test which test for
serial correlation between errors and the value closer to 2 are acceptable(Field, 2009).As
described on the table above values of Durbin-Watson on statistics value are 2.085 which
is close to 2 which suggests that there is no severe autocorrelation among error terms.

4.9.8. Analysis of Variance /ANOVA/ Test

ANOVA tests indicate that whether the model is significantly better at predicting the
outcome than using the mean as a ‟best guess‟ (Field, 2006). ANOVA model is more likely
to be significant, indicating that at least one group mean is different from another group
mean.
52
ANOVA is the appropriate statistical technique to examine the effect of a less-than interval
independent variable on an at-least interval dependent variable. If the F test result is not
significant, the model should be dismissed and there is no need to proceed to further steps
(William and Barry, 2010). On the other hand, regarding to ANOVA test Saunders et al.,
(2012) discussed that a very low significance value (usually less than 0.05) means that your
coefficient is unlikely to have occurred by chance alone. A value greater than 0.05 means
you can conclude that your coefficient of multiple determinations could have occurred by
chance alone. Therefore, the ANOVA table and test result is presented and discussed below
Table 23 : provides the results on the analysis of the variance (ANOVA)

ANOVAs
Model Sum of Squares Df Mean F Sig.
Square
1 Regression 52.666 26 2.026 9.442 .000a
Residual 22.311 105 .215
Total 74.977 131
Source: Survey Result, 2021
The analysis of variance ANOVA is used to determine whether the model overall is a good
fit. From the ANOVA statistics, the processed data (population parameters) had a
significance level of 0.000. This shows that the data is ideal for making conclusions on the
population’s parameter as the p-value is less than the significance level of 0.05. The
analysis of variance ANOVA is used to determine whether the model overall is a good fit.
From the ANOVA statistics, the processed data (population parameters) had a significance
level of 0.000. This shows that the data is ideal for making conclusions on the population’s
parameter as the p-value is less than the significance level of 0.05. In view of the results
in table above, The F calculated was greater than F critical 9.442>2.026. This
shows Livestock owner ship ,Land size holding, Loan size, Save culture and marital status
significantly influences financial performance of house hold saving
4.9.9. Interview results
This section presents the results of the study in achieving the objectives aimed to address
based on the methodology discussed in chapter three above. This section emphasize on
showing the services and products of MFIs, the contribution of MFIs for Lalo Kile
community development and the challenges of MFIs to provide services to the

53
communities and the remedies for the problems. The interview cover 1 district managers
and 3 credit officers of MFIs and 2 government officials.
As discussed with district manager and credit officer, OCSSCO provide financial as well as
nonfinancial services for Lalo Kile communities. The financial services include saving,
credit, money transfer and fund administration services to the poor communities. Whereas
the non-financial services include training, consultancy and orientation service as
well as monitoring and supervision.
The Interviews result shows that financial as well as non-financial services to the poor
communities. The financial services delivered by OCSSCO town are lending and saving
services.
Whereas Non-financial service provided by the company takes in to account the
following: consultancy and orientation service as well as monitoring and The
interviewee informed that OCSSCO delivered different types of saving to the communities
in Lalo Kile Woreda District, includes mandatory saving, security saving, monthly
saving, voluntary saving such as loan and non-loan clients saving, box saving,
Provident fund saving, time deposit, and pension saving in whereas in Lalo kile Woreda
the communities used the institution for mandatory saving, security saving, loan and non-
loan clients saving. As discussed with the OCSSCO official and District manager,
OCSSCO provide different types of saving to the communities in Lalo Kile Woreda. These
includes Mandatory saving, security saving, monthly saving, voluntary saving such as loan
and non-loan clients saving, box saving, Provident fund saving, time deposits, children
saving, and pension saving, however the communities mainly used the mandatory saving
and security saving. The interviewee informed that the loan delivered by OCSSCO in
town include micro loan, small loan, consumption loan, agricultural loan, short term loan
and Housing loan. Also OCSSCO provide different types of loan to communities for
different purposes. These include agricultural loan, Small and micro enterprise loan
and urban petty trading loans. Agricultural loans is a one-year loan for agricultural
purposes including oxen, poultry, fattening, pesticide, fertilizers, seeds, dairy, animal
husbandry, small irrigation, land rent, handicraft, honey bee keeping and household
asset building. Small and micro enterprise loan is designed to minimize
unemployment, stimulate micro & small enterprises, increase technology transfer, and
solve the problems of the borrower. It includes a housing loan, general purpose loan and
business loan

54
 CHAPTER FIVE

5 SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 . Summary of Findings

5.1.1 .Livestock owner ship performance

The first objective of the study was to decide the effect of Livestock owner ship on
house hold saving in Lalo Kile Woreda. The findings revealed that there was a positive and
significant relationship between Livestock owner ship on house hold saving. The result
were also supported by the statements in the questionnaire which mass of the respondents
agreed. This was also supported by the regression results which revealed that Livestock
owner ship had a positive and significant effect on House Hold Saving.

5.1.2 Land Size Holding monetary Performance

The second objective of the study was to determine the effect of Land Size Holding on
House Hold Saving. The result revealed that there was a positive and significant
association between saving culture and marital status. The answer was also supported by
the statements in the questionnaire which majority of the respondents agreed. This was also
supported by the regression results which discovered that Land Size Holding had a positive
and significant effect on House Hold saving.

5.1.3 Loan size monetary Performance

The third objective of the study was to determine the effect of Loan size on
household saving. The result discovered that there was a positive and significant
relationship between loan size and house hold saving. The findings were also supported by
the statements in the questionnaire which majority of the respondents agreed. This was also
supported by the regression results which discovered that Loan Size had a positive and
significant effect on House Hold Saving.

55
5.1.4 Saving Culture of financial Performance

The fourth objective of the study was to decide the effect of Saving Culture on House Hold
Saving. The judgment shows that there was a negative and significant relative between
Saving Culture practice and House Hold Saving. The result was also supported by the
statements in the questionnaire which majority of the respondents agreed. This was also
supported by the regression results which discovered that Saving Culture had a negative
and significant effect on House Hold Saving.

5.1.5 Marital status of saving financial Performance

The fourth objective of the study was to decide the effect of Marital status practice on
House Hold saving. The judgment shows that there was a negative and significant relative
between Marital status practice and House Hold Saving. The result was also supported by
the statements in the questionnaire which majority of the respondents agreed. This was also
supported by the regression results which discovered that marital status practice had a
negative and significant effect on House Hold saving.

5.2 Conclusion

The study set up that Livestock owner ship was statistically important in explaining
on house hold saving. This indicates that Livestock owner ship had a positive relationship
with house hold saving. The study concludes that a unit increase in Livestock owner ship
would show the way to an amplify in House Hold Saving. In addition, Land Size Holding
was statistically important in explaining on lalo kile Woreda House hold Saving. This is an
indication that Land size Holding has a positive relationship with lalo kile Woreda House
hold Saving. The study concludes that increase in Land size Holding direct to increased
saving in the Lalo Kile OCSSCO studied. In addition, Loan size was statistically
important in explaining on House Hold Saving of Woreda

This indicates that Loan size had important positive relationship with financial
performance of OCSSCO. The study concludes that positive increase in lalo kile
Woreda House hold Saving would answer to an increase in financial performance of
individual and micro financial institutions. Finally the study established that saving

56
culture were statistically important in explaining saving financial performance. This shows
that saving culture had important positive relationship with financial performance of the
individual and Lalo Kile OCSSCO. The study concludes that positive increase in
saving culture were result to an increase in saving financial performance of House Hold
and Oromia credit Saving Share Company.

5.3 Recommendations

The study also recommends that the House Hold need to improve their saving techniques,
such like Cultivating Livestock owner ship, land size holding ,Loan size, Saving culture
and Marital status.. This will facilitate improvement of saving financial performance by
having a positive performing in terms of recovery. Micro-finance institutions have
suffered loan losses through peaceful lending standards, the borrower’s (poor
communities) perception and unguaranteed credits. The study therefore recommends
that the House holds improve their saving must be control by financial and non financial
ways

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 APPENDIX A
GREAT LAND COLLEGE

SCHOOL OF GRADUATE STUDIES

Questionnaire to be filled by Impact of Microfinance on House Hold

saving in Lalo Kile Woreda OCSSCO
Questionnaires to be filled by clients, employee of Oromia credit and Saving Share
Company and other sectors doing with OCSSCO collaboratly this questionnaire will be
aims at to establish the effect of MFIs on HHS practice in the financial performance of
the Oromia Credit and Saving share company (OCSSCO). The Questionnaire will be
prepared for clients and to be translated to afan Oromo.

Dear Respondents:

The information to be collected in this questionnaire is only for academic purpose and will
strictly confidential. Therefore, your genuine, and timely responses are important to
determine the success of this study. So, I kindly request your cooperation in filling
the questionnaire honestly and reliably.

 Don`t write your name

 Encircle the letter of your choice and if there another option write on black space given

A. Socio-demographic characteristics of customers

1. Age
A) 15-27 C) 41-60 years
B) 28-40 years D) Above 65 years
2. Sex
A) Male B) Female
3. Marital Status
A) Single B) widowed
C) Married D) Divorced
4. Occupation
A) Farmer B) Handiwork

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C) Civil Servant D) Petty Trade E) Daily Laborer F) Service Provider
G ) Tailor H) Merchant
If other, specify______________________
5. Educational Level
A) Illiterate C) 1-4 grade E) 9-12 grade
B ) Basic Education D) 5-8 grade F) college and above
Part B: Credit Risk Management Practices
1.Livestock Owner ship
4. What is your level of agreement on the following statements relating to Livestock owner
ship in Saving Financial performance LALO KILE OCSSCO HH?
Statement

Strongly

Strongly
disagree
Neutral
Disagre
Agree
agree
Livestock viable strategy were improve saving
management.
Accepting Livestock owner ship macanizem
has change society
Livestock ownership one of saving method
for changing .
Livestock does help the Economy of society

Livestock viable strategy were improve saving

management.

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 2.Land Holding.
5.What is your level of agreement onthefollowing statements relating to by Land Size saving in
LaloKile Woreda OCSSCO performance.?
Statement Strongl Agree Neutr Disagre Strongly
y agree al e Disagree
Available Land Size have assisted
towards efficient in saving performance.
To Having Land size change Financial
Performance of House hold..
Enforcement of Land policies provides
chances for improving loan recovery .
Regular reviews have been done on
Land Size to improve state of Saving
House Hold
Land Size Have Change Economy
A Land size is more effective in saving
culture.
3.Loan size
9. What is your level of agreement on the following statements relating to Loan Size of Lalo Kile?

Statement OCSSCO

Disagree
Disagree
Strongly

Strongly
Neutral
Agree

posing loan size limits is a viable strategy in credit

management
The use of credit checks on regular basis enhances
credit management.
Flexible repayment periods improve loan repayment.
Penalty for late payment enhances
customers commitment to loan repayment
The use of customer credit application
forms improves monitoring and credit management as
Well
posing loan size limits is a viable strategy in credit
management

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 4.Saving Culture
10. What is your level of agreement on the following statements relating to Saving culture Of
Lalo Kile woreda selected Kebele
The communication of House holds Saving Culture

Disagree
Strongly

Strongly
Neutral
and their business

Agree
agree
plan and incentive plan
should be consistent to eliminate changing Economy.
Saving Culture should be in a clear, format and
enforced by an authority who is independent of
the business origination function changing
house hold saving.
Clear accountability should be established for
every personnel involved in the management
of saving Culture.
Accepting responsibility for saving culture
quality and encourages financial performance
of Individual .
There should be strong saving Culture in the
society level .

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 5. Marital Status
12. What is your level of agreement on the following statements relating to Marital status

Statement Strongly Disagree Neutral Agree Strongl

disag. y agree
How do you think few family have been communication of credit standards, credit policy,
business plan very great change on sassing Financial Performance practice.

Marital status have good

deliver Financial
performance of saving.

Clear accountability in
Marital stutas should be
established for every
personnel involved in the
management of saving.
If marital status united
together accepts
responsibility for saving can
change their Economy .
There should be strong
management at the top of the
Family make sustainable
Financial performance .

Interview Questions
1. How do you describe the extent of an overall decrease in HHS financial risks and
scandals ?
_________________________________________________________________________
2. What is the level of Lalo Kile Woreda HH value has risen up with respect to overall
profit ?
_________________________________________________________________________
3. How do you describe the extent of impact of MFI affects HHS performance ?
_________________________________________________________
Thank You

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