Kindie Getnet

Agricultural Cooperatives and Rural Livelihoods: Evidence from Ethiopia

Agricultural cooperatives are important rural organizations supporting livelihood development and poverty reduction. In recognition of such roles of cooperatives, Ethiopia showed a renewed interest in recent years in promoting cooperative sector development. However, there is lack of a wider and systematic analysis to produce sufficient empirical evidence on the livelihood development and poverty reduction impacts of cooperatives in the country. Using a matching technique on rural household income, saving, agricultural input expenditure and asset accumulation as indicator variables, this paper evaluates the livelihood impact of agricultural cooperatives in Sidama zone, Ethiopia. The finding shows that cooperatives improved the livelihoods of service user farmers through impacting better income, more savings and reduced input costs. In view of such evidence, further promotion, deepening and supporting of agricultural cooperatives is recommended.

Impact of Agricultural Cooperatives on Smallholders’ Technical Efficiency: Evidence from Ethiopia

Using household survey data from Ethiopia, this paper evaluates the impact of agricultural cooperatives on smallholders’ technical efficiency. We utilize propensity score matching to compare the average difference in technical efficiency between cooperative farmers and similar independent farmers. The approach assumes exogenous cooperative formation and similar farm technology across households. The results show that agricultural cooperatives are effective in providing support services that significantly contribute to members’ technical efficiency. These results are found to be insensitive to hidden bias and consistent with the idea that agricultural cooperatives enhance members’ efficiency by easing access to productive inputs and facilitating extension linkages. Based on the findings, increased participation in agricultural cooperatives should further enhance efficiency gains among smallholder farmers.

Financial Sustainability and Outreach of Microfinance Institutions in Ethiopia: Does Organizational Form Matter?

Growing commercialization and competition in microfinance drives the focus of micro lenders from outreach per se to achieving financial sustainability in serving the poor. Such a goal can conflict with the traditional social mission of microfinance � outreach to the poor. In places where credit markets are inefficient, attaining financial sustainability while serving the poor depends largely on the ability of lenders to overcome the costs of market contracts and constraints. Such ability of cost containment often varies by lending terms and organizational forms. Using disaggregated data of microfinance providers in Ethiopia, we compared financial cooperatives and specialized or non-bank microfinance institutions on their outreach, financial performance and ability to achieve financial self-sufficiency together with outreach to the poor. The results show that nonbank microfinance providers perform relatively well in terms of breadth and depth of outreach, but face higher cost, which creates tension between outreach and financial sustainability. In contrast, there exists a positive complementarity between outreach and financial viability for financial cooperatives. On average, financially self-sufficient cooperatives lend small size loans and serve larger proportions of women borrowers, implying a greater depth of outreach together with achieving financial sustainability. While non-bank microfinance providers do better in expanding outreach, based on the findings, financial cooperatives better contain their costs, balance social and economic goals and enable the microfinance industry to fulfill its full promise �serving the poor on cost-covering basis.

Managing rainwater, improving livelihoods: assessing impacts using a Rainwater–Livelihoods–Poverty Index (RLPI)

Assessing and empirically measuring the development impact of rainwater management innovations to inform related decisions remains conceptually and methodologically difficult. Whether it is empirically more appropriate to assess and measure the impact pathways than the impact per se remains an important methodological issue. This paper proposes a Rainwater–Livelihoods–Poverty Index (RLPI) as a comprehensive and participatory impact pathway assessment technique with measurable indicators recapitulating the sustainable livelihoods framework. The methodological contributions to rainwater impact assessment are two-fold. First, the RLPI explicitly incorporates intermediate processes and impact pathways as important factors affecting the development impacts of rainwater-related interventions. Second, the RLPI combines quantitative and qualitative household response data into a single yet meaningful quantitative impact indicator. This makes the methodology participatory, allowing farmers engagement to use their knowledge (as local expert observers) in informing rainwater management decisions. The methodology is empirically tested in Diga district (western Ethiopia) and validated using expert opinions.

Cost Efficiency and Outreach of Microfinance Institutions in Ethiopia: Do They Contrast with Financial Cooperatives?

Using a stochastic frontier approach, we analyse the imposition of financial sustainability requirement on the traditional social mission of microfinance – outreach to the poor. We also address whether the way ownership is organised and practiced affects the costs of microfinance delivery. Based on a disaggregated 107 sample microfinance providers in Ethiopia, the results suggest that outreach to the poor and achieving financial sustainability (as measured by cost efficiency) are contradictory objectives. Microfinance providers that are closer to the best practicing cost frontier are those with higher average loan sizes and lower proportion of women borrowers. The results also indicate that financial cooperatives are better in cost containment compared to specialised microfinance institutions.

Financial Sustainability and Outreach of MFIs in Ethiopia: Does Ownership Form Matter?

The way ownership is organized and its effects on social and economic performance have been at the centre of policy discussions in microfinance (Mersland, 2009; Mersland and Strom, 2009). Over the last decades, shareholder-owned microfinance institutions have been promoted as an efficient ownership form over non-government and member-owned microfinance providers (Pischke, 1996; Armendariz and Morduch, 2010). Proponents of the financial systems approach, in particular, subscribe to policies that entail the transformation of nongovernment and member-owned microfinance institutions into shareholder firms (Christen, 2001; Fernando, 2004; Rhyne and Otero, 2006; Frank, 2008). The rationale is that private ownership in microfinance can act as an external control mechanism or corporate governance system that can curb excess costs and attract commercial funds and deposits, which may improve efficiency and expand outreach to the poor (Christen, 2001).