THE EFFECT OF OMO MICRO FINANCE INSTITUTION IN IMPROVING THE PRODUCTIVITY OF SMALL SCALE FARMERS: THE CASE OF GAMO ZONE

Abstract

This study was conducted with the main objective of analyzing the role of OMFI in enhancing the productivity of small scale farmers. The study used both primary and secondary data sources. The respondents were selected through simple random sampling techniques. The study used qualitative and quantitative data collection tools. Method of data collection done through survey questions both closed and open ended. In the case of primary data, the data collected through structured questionnaire and by using key informants as well as focus group discussions. Whereas, in the case of secondary data, the data collected from the institution annual performance reports, audit reports, abstracts and brochures. The data analysis was done with the help of statistical package (that is, by using SPSS version 20) through regression analysis to develop inferential statistics to know the relation between the dependent variable and the independent variables. The major results of the descriptive statistics and the regression model showed that saving habit, income, usage of agricultural inputs, land size, land expansion, easy loan release, door to door service, appropriate loan utilization are important and significant factors that enhance the production and productivity of small farmer; while, loan diversion, inadequate loan size, lack of customer handling, lack of training and consultation and lack of support and supervision on loan utilization are found to significantly increase loan default and have a negative impact on production and productivity of small farmers. Regarding on usage and repayment of loan, which can use their loan appropriately enhance their production and productivity and also it have a positive impact on repayment performance. According to these findings the institution is recommended to see into these factors with care and design a better lending strategy, focusing on effective supervision, training and approval of appropriate loan size so as to minimize the loan default problem observed. Also the number of women clients need due consideration in the study area. Moreover, it should pay attention to make the sub branch operational self-sufficiency and expand its services by improving the performance through reducing the expense, arrears and loan default and in contrary by increasing saving mobilization, net saving, amount of loan disbursed, loan repayment, portfolio outstanding, the productivity of staff members for improving and enhancing the profitability and sustainability of the sub branch