A THESIS SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES OF ARBA MINCH UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS OF ARTS IN GEOGRAPHY AND ENVIRONMENTAL STUDIES.

Abstract

Currently, the rapid growth of microfinance industry has made itself an unavoidable part of the world financial system. In sub-Saharan Africa, MFIs have greater number of people who save money than other parts of the country. This study was aimed at assessing the contribution of credit service of microfinance institutions onlives of rural households of Jarso Wereda,West Ethiopia.Data for the study were acquired from both close and open-ended questionnaire, informant interview, and personal observation and focused group discussion.Questionnaires were distributed to 152 farmer clients who were selected using a simple random sampling technique. Data from the households‟ survey questionnaire weretabulated and summarized by using statistical package for social science (SPSS).Both qualitative and quantitative methods of data analysis were employed. The findings of the study indicated that farmers in the study area hadnotshown improvement in living condition because of absence of diversity of income sources, inability in becoming self-sufficient in food, incapability of satisfying basic needs, no change of income from moderate to high, incapability of affording cost of education and health service and no change of living standard from moderate to high before they get credit service from micro finance institution. Because of shortage of landand money farmers did not buy enough improved seeds, fertilizer, herbicides, pesticides, and etc.Due to this, they cultivated only single subsistent crops.But, after they get credit service from microfinance institution the life conditions of people have been showing improvement.In terms of service quality, the organization has performed poorly. Inefficiency of the institution likelack of adequate financial advice, transparencyandapproachability, lack of easy access to account information, unequal treatment of clients, poor handling of documents, and lack of experience are the main factors influencing the service quality of microfinance institutions in the study area. Due to this,perceptions of the beneficiaries were poor. In line to the above, it has been recommended that improving the professional skill, raising small loans, upgrading the educational level of the farmers, providing material to the institution and integration of the whole service with other sectors require immediate attention. Keywords:socio-economic,microfinance,credit,saving,livelihood