Review on Farmers’ Microfinance Services Participation and Its Impact on Poverty Reduction in Ethiopia

Abstract

The financial sector has enabling role for agriculture as credit is used for investments and savings ensure a safe storage of money. In Ethiopia, regarding microfinance service provision, consecutive reforms were made to sustain the service. However, utilization of the service among the community is at low-level and affected by a different factors. This review was crucial to review different research works on how farmers participate in the microfinance services and it is necessary to assess the determinants of farmers’ participation in microfinance services and evaluate its impact on clients poverty reduction. Despite the increased outreach and expanded service provision of microfinance in Ethiopia, the agricultural sector has low financial service provided due to clients and the institution related characteristics.The major objective of this review was to review farmers’ Microfinance services participation and its impact on poverty reduction in Ethiopia. Significant variation across different microfinance impact studies on methodological, analytical, conceptual and outcome variable selection has been happened. These conditions resulted in limited evidence about real impact of microfinance service due to scope, reliability, quality and ability to generalize the findings. Therefore, this review findings argue for further investment in impact assessment through broadening the criteria on which the impact is assessed and generalization is made for further policy directions.