WOMEN EMPOWERMENT THROUGH MICROFINANCE: THE CASE OF VILLAGE SAVING AND LOAN ASSOCIATION IN KURFA CHELLE DISTRICT, EAST HARARGHE ZONE, OROMIA REGIONAL STATE, ETHIOPIA

M.Sc. Thesis

HOSSAENA HAILEMARIAM

November 2013 Haramaya University

WOMEN EMPOWERMENT THROUGH MICROFINANCE: THE CASE OF VILLAGE SAVING AND LOAN ASSOCIATION IN KURFA CHELLE DISTRICT, EAST HARARGHE ZONE, OROMIA REGIONAL STATE, ETHIOPIA

A Thesis Submitted to College of Agriculture, Department of Rural Development and Agricultural Extension, School of Graduate Studies HARAMAYA UNIVERSITY

In Partial Fulfillment of the Requirements for the Degree of MASTER OF SCIENCE IN RURAL DEVELOPMENT AND AGRICULTURAL EXTENSION (RURAL DEVELOPMENT)

By Hossaena Hailemariam

November 2013 Haramaya University ii

SCHOOL OF GRADUATE STUDIES HARAMAYA UNIVERSITY As Thesis Research advisor, I hereby certify that I have read and evaluated this thesis prepared, under my guidance, by Hossaena Hailemariam, entitled: ‘‘Effect of Microfinance on Rural Women Empowerment: The Case of Village Saving and Loan Associations in Kurfa Chelle Woreda, East Hararghe Zone,Oromiya regional state, Ethiopia. I recommend that it be submitted as fulfilling the Thesis requirement. Prof. Ranjan S. Karippai Major Advisor Dr. Jemal Yusuf Co .Advisor

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As member of the Board of Examiners of the M.Sc Thesis open Defence Examination, we certify that we have read, evaluated the Thesis prepared by Hossaena Hailemariam and examined the candidate. We recommended that the Thesis be accepted as fulfilling the Thesis requirement for the Degree of Master of Science in Rural Development and Extension (Rural Development).

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DEDICATION I dedicated this thesis manuscript to my deceased father, Hailemariam Worldegiorgis who devote the scarce family resources to my education, inspiration, and envision me for higher education.

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STATEMENT OF AUTHOR

First, I declare that this thesis is my original work and all sources of material used for this thesis have been duly acknowledged. This thesis has been submitted in partial fulfilment of the requirements of MSc degree at Haramaya University and is deposited at the University Library to be made available to users under rules of the Library. I also declare that this thesis can be submitted to any other institutions, if the University found it necessary. Brief quotations from this thesis are allowable without special permission provided that accurate acknowledgement of source is made.

Name: Hossaena Hailemariam Signature ___________________ Place: Haramaya University, Haramaya Date of Submission: November 2013

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BIOGRAPHY The author, Hossaena Hailemariam, was born in West Hararghe zone, Debesso rural kebele in 1968 G.C. He completed his primary education at Boke Tiko Primary and Junior Secondary School. He attended high school education at Chercher Comprehensive Secondary high School in Asebe Teferi. He then joined Jimma Junior Agricultural College (now Jimma University) in September 1988 and graduated with Diploma in Plant Science in July 1989. He also attended accounting course from 2000-2003 GC on continuing education program at DD centre graduated with Diploma and Rural Development and Agriculture Extension course 2003-2007 Bsc degree program from the then Haramaya University. After his graduation from Jimma Agricultural College, first he employed for the ministry of agriculture, East Hararghe zone, Deder and Meta woredas and worked in the capacity of development agent and extension supervisor positions for nine years. Then, from 01 December 1997 to November 2005 worked for Oxfam GB, Hararghe program office and served in the capacity of Project Officer and Project Manager Positions. From April 2006 joined CARE Ethiopia, East Hararghe Field Office and serving to date in following positions, Monitoring and Information Officer, Livelihoods Officer, Emergency Response Facilitator, Emergency Project Manager, and now working in the capacity of Field Office Program and Operation Manager. He joined Haramaya University to pursue his post graduate study in rural development, Kiremt in Service (summer) program in July 2010 G.C.

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ACKNOWLEDGEMENTS I convey my greatest thanks and heartfelt appreciation to my major advisor Professor Ranjan S. Karippai for his guidance, valuable comments, and encouragement to finalize the thesis write up. I do also want to extend my acknowledgment and thanks to my co-advisor Dr. Jemal Yusuf for his valuable comments and guidance to compile this research thesis. Special thanks and acknowledgement should go to Dr. Belayneh Legesse for his guidance and sharing valuable reference materials. I would like to express my sincere appreciation and thanks to CARE Ethiopia, Senior Leadership Team (SLT) members, Abby Maxman, Garth Vant hul, Moges Tefera, Berhanu Moreda, Bena Musebi, Mandefro Mekete, and Asmare Ayele for financial sponsorship and extended leave approval at time of pick working months. Similarly I would like to appreciate the field office leadership team members and all beloved CARE East Hararghe staff members for their sincere support and encouragement in the entire research process. Unreserved acknowledgements and appreciation goes to the field work enumerators who carefully and patiently collected data for this study. Many thanks and appreciation should reaches to 180 target respondents for their valuable information and time scarified for interview and group discussion, without their cooperation the study would not have been possible. Finally, I would like to express my deepest thanks to my wife Tsedeku Bekele and my children, Nahome, Kenean, and Soleyana for their all-round support and patience showed during the research process. I am indebted to my friend cum Brother Kedir Mumade, Dereje Muluneh, Wubeshet Genene, Zewdu Sisay, Petrose Tafesse, and Getahun Tessema for their encouragement, valuable comments, and advices throughout the course of my study. Above all I would like to praise the almighty God for giving me the courage and endurance to finalize this thesis.

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LIST OF ABBREVIATIONS AND ACRONYMS AJPH

American Journal of Public Health

ADLI

Agricultural Development Lead Industrialization

ANOVA

Analysis of Variance

CARE

Cooperation for Aid and Relief Everywhere

CIA

Central intelligence of Agency

CSA

Central Statistical Authority

CSSLG

Community Self-help Saving and Lending group

CRGE

Climate Resilient Green Economy

DFID

Department for International Development

FAO

Food and Agricultural Organization

FGD

Focus Group Discussion

FDRE

Federal Democratic Republic of Ethiopia

GTP

Growth and Transformation Plan

HH

Household

HIBRET

Household Income Building and Rural Empowerment for Transformation

IFAD

International Fund for Agriculture Development

MMD

Mata Masu Dubara

MoARD

Ministry of Agriculure and Rural Development

MoFED

Ministry of Finance and Economic Development

NBE

National Bank of Ethiopia

OLS

Ordinary Least Square

PASDEP

Plan for Accelerated and Sustainable development to End Poverty

PRSP

Poverty Reduction Strategic Paper

SDRPRP

Sustainable Development and Poverty Reduction Program

SIDA

Swedish International Development Assistance

SLA

Sustainable Livelihoods Approach

UNCDF

United Nations Capital Development Fund

VSLA

Village Saving and Loan Association viii

TABLE OF CONTENTS STATEMENT OF AUTHOR

v 

BIOGRAPHY

vi 

ACKNOWLEDGEMENTS

vii 

LIST OF ABBREVIATIONS AND ACRONYMS

viii 

TABLE OF CONTENTS

ix 

LIST OF TABLES

xii 

LIST OF FIGURES

xiv 

LIST OF TABLES IN THE APPENDICES

xv 

ABSTRACT

xvi 

1.  INTRODUCTION

1 

1.1. Background of the Study

1 

1.2. Statement of the Problem

3 

1.3. Objectives of the Study

5 

1.4. Research Questions

5 

1.5. Significance of the Study

6 

1.6. Scope and Limitation of the Study

7 

1.7. Organization of the Thesis

7 

2. LITERATURE REVIEW

8  8 

2.1. The Concept of Empowerment 2.1.1. Definition of women empowerment 2.1.2. Operational definition of empowerment

9  11 

13 

2.2. Microfinance 2.2.1. Microfinance in Ethiopia

15 

2.2.2. Village saving and loan associations’ microfinance

17 

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TABLE OF CONTENTS (CONTINUED) 2.2.3. Microfinance and livelihoods diversification

19 

2.3. Women Empowerment through Microfinance

21 

2.4. Indicators of Women Empowerment through Microfinance

22 

2.5. Measuring Women Empowerment through Microfinance

24 

2.6. Empirical Findings on Women Empowerment

27 

2.7. Conceptual Framework of the Research

29 

3.  RESEARCH METHODOLOGY

32 

3.1. Description of the Study Area

32 

3.2. Sampling Procedures

35 

3.2.1. Sample size determination

36 

3.2.2. Data type and methods of data collection

38 

38 

3.3. Methods of Data Analysis 3.3.1. Descriptive statistics

39 

3.3.2. Econometrics model

39 

3.4. Definition of Variables and Working Hypothesis

42 

3.5. Definition and Codes of Variables

50 

4.  RESULTS AND DISCUSSIONS

51 

4.1. Empowerment Status of the Sampled Respondents

51 

4.2. Influence of Explanatory Variables on Women Empowerment

54 

4.2.1. Age of the respondents

54 

4.2.2. Marital status of respondents

55 

4.2.3. Age difference with husband

57 

4.2.4. Working age family size and women empowerment

58 

4.2.5. Dependency ratio

60 

4.2.6. Level of formal education

61 

4.2.7. Distance from main market center

62 

4.2.8. Years of experience in income generation

63 

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TABLE OF CONTENTS (CONTINUED) 4.2.9. Years of membership in Village saving and loan association

74 

4.2.10. Extension Participation

75 

4.2.11. Contact with extension agent

77 

4.2.12. Cumulative amount of loan

79 

4.2.13. Livestock ownership

80 

4.2.14. Distance from district town

82 

4.3. Summary of Results of Descriptive Statistics

83 

4.4. Determinants of Women Empowerment

84 

4.5. Saving and Loan Use Patterns

90 

4.5.1. Saving status

91 

4.5.2. Loan use pattern

95 

5.  CONCLUSION AND RECOMMENDATIONS

99  99 

5.1. Conclusion

100 

5.2. Recommendations

6.  REFERENCES

104 

7.  LIST OF TABLES IN THE APPENDCE

114 

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LIST OF TABLES Table

Page

1. Distribution of sampled respondents in sample kebeles ------------------------------------- 36  2. Empowerment indicators and their respective scores ---------------------------------------- 45  3. Definition and codes of variables in the study ------------------------------------------------ 50  4. Empowerment categories of sampled respondents ------------------------------------------- 52  5. Empowerment status of respondents by membership ---------------------------------------- 53  6. Age of respondents and women empowerment (n=180) ------------------------------------- 55  7. Marital status and women empowerment (n=180) -------------------------------------------- 57  8. Husband age difference and women empowerment (n=152) -------------------------------- 58  9. Working age family size and women empowerment ------------------------------------------ 59  10. Dependency ratio and women empowerment (n= 180) ------------------------------------- 61  11. Levels of formal education and women empowerment ------------------------------------- 62  12. Distance from main market center and women empowerment (n=180) ------------------ 63  13. Sampled respondents experience in income generation (n=180) -------------------------- 64 14. Years of experience in income generation and women empowerment (n=180) -------- 66  15. VSLA members’ levels of improvement in income generation (n=90) ------------------- 67  16. VSLA members’ levels of control on income generation ----------------------------------- 67  17. VSLA members’ mobility to run income generation activities (n=90) --------------------68  18. VSLA members’ level of workload to run income generation (n=90) -------------------- 69  19. Distribution of Respondents means of workload alleviation (n=180) ------------------- 70  20. Husband’s level of decrease in household expenditures (n=180) -------------------------- 73  21. Level of women’ contribution for household expenditures (n=90) ------------------------ 74  22. Years of membership in VSLA and women empowerment (n=180) ---------------------- 75  23. Frequency of extension participation and women empowerment (n = 180) ------------- 77 

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LIST OF TABLES (CONTINUED) 24. Distribution of respondents contact with extension agent (n =180) ----------------------- 78  25. Respondents contact with development agents (n=180) ------------------------------------ 79  26. Cumulative amount of loan and women empowerment (n=180) ------------------------ 80  27. Respondetns’ livestock ownership (TLU) (n=180) ------------------------------------------ 81  28. Distance from district town and women empowerment ------------------------------------- 82  29. Summary results of dummy variables --------------------------------------------------------- 83  30. Summary results of continuous variables ----------------------------------------------------- 84  31. Multicollinearity test for continuous explanatory variables -------------------------------- 85  32. Multicollinearity test result for dummy variables -------------------------------------------- 86  33. Determinants of Women Empowerment ------------------------------------------------------ 87  34. Distribution of respondents by ownership of cash saving (n=180) ------------------------ 92  35. Respondents’ level of cash saving improvement (n=180) ---------------------------------- 93  36. Respondents level of control on personal cash saving (n=126) ---------------------------- 94  37. Distribution of respondents by place of cash saving (n=128) ------------------------------ 95  38. Loan taking history of respondents for the last 12 months (n=180) ---------------------- 95  39. Distribution of respondents by reasons not taking loan (n=62) ---------------------------- 96  40. Distribution of Respondents by sources of borrowing (n= 118) --------------------------- 97  41. Distribution of respondents by the use of loan received (n=118) -------------------------- 98  42. Distribution of borrower by level of control on loan taken (n=118) ----------------------- 98 

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LIST OF FIGURES  

Figure

Page

1. Conceptual framework modified from (sebstad et al, 1995)

30 

2. Map of the study woreda

34 

3. Schematic presentation of sampling design

37 

4. Sampled respondents experience in income generation

65 

5. Respondents Contact with extension Agents

78 

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LIST OF TABLES IN THE APPENDICES Appendix

Page

1. VSLA status report of kurfa chelle woreda, June 2011.

109

2. Conversion factors used to estimate tropical livestock unit (TLU)

109

3. Interview schedule

110

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WOMEN EMPOWERMENT THROUGH MICROFINANCE: THE CASE OF VILLAGE SAVING AND LOAN ASSOCIATION IN KURFA CHELLE DISTRICT, EAST HARARGHE ZONE, OROMIA REGIONAL STATE, ETHIOPIA  

By Hossaena Hailemariam ABSTRACT This study set out to assess the effect of microfinance on rural women empowerment in the case of Kurfa Chelle District East Hararghe Zone, Oromia Regional State, Ethiopia. The study employed multi-stage sampling technique to draw 180 sample respondents. Simple descriptive statistical analysis such as mean, standard deviation, percentage, and an econometric model of ordered logit were used to analyse the data. Results of the study revealed that the empowerment status of the village savings and loan association members were better than the non-members most at 1% levels of probability. The results of the econometric model outputs showed that marital status, dependency ratio, distances from the nearest market have negative influence on women empowerment. On the other hand, family size, level of formal education, years of experience in income generation, years of membership in village saving and loan associations, livestock ownership, and extension participation have positive contribution to influence women empowerment. The descriptive statistics results on saving and loan use pattern of the sampled respondents of the association members indicated significant changes on saving and credit uptakes. In nutshell village saving and loan association microfinance products has creating wider opportunity for members to engage in productive activities and linkage with formal MFI institution enhanced access to credit services. However, women empowerment cannot be attained through mere provision of microfinance as it determined by many other factors indicated above. Therefore, programs that aiming at inducing women empowerment through microfinance program needs to consider the importance of factors that affect both negativelyn and positively. Besides this, provision of quality extension service and enhancing frequency of extension participation for rural women needs special attention as these intervention have positive influence on women empowermen.

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1. INTRODUCTION

1.1. Background of the Study  

Ethiopia is the ninth largest country in Africa with the total land mass of 1.14 million square kilometre. The total population is more than 82 million (CSA, 2012). The current population size makes the second populous country in the continent next to Nigeria, with annual growth rate of 2.6% (CIA, 2011). However, the total fertility rate of Ethiopia has declined from 5.4 children per woman in 2005 to 4.8 children in 2011, under-five mortality rate decreased from 166 deaths per 1000 live births in 2000 to 88 in 2011, and infant mortality decreased from 97 deaths per 1000 live births to 59 in 2011 (CSA, 2012). Moreover, the country is one of the fastest-growing economies in sub-Saharan Africa, with an average GDP growth rate of 8.2% between 2000 and 2011, which was significantly higher than the sub-Saharan average 4.7% or the East Africa average 6.7% (Nganwa, 2013). Agriculture is the mainstay of Ethiopia economy, which contributes 43% of the GDP and 90% of exports (CSA, 2007, MoARD, 2010). The sector will remain the dominant economic sources for the foreseeable future as the country has experienced virtually no significant transformation in its ecomomic structures (Tesfaye et al., 2004). However, the agriculture sector characterized with low productivity due to recurrent drought incicences, limited access to agricultural inputs, financial services, improved production technologies, irrigation, agricultural markets, and too poor land management practices leads to food insecurity. (Devereux, 2000, FAO, 2006, Zemen, 2013). To alleviate such multifaceted agricultural problems, particularly in drough prone areas, the availability of appropriately-designed financial services is an essential component to create enabling environment for rural economic growth and poverty reduction (World Bank 2003). Introduction of suitable credit products and supplementary income diversification in off-farm and non-farm activities and strengthening market effectiveness, credit services through micro1

finance institutions, establishment of marketing cooperatives, and provision of training for both agricultural and non-agricultural sectors can enable borrowers to engage productive activities (Gebrehiwot and Wolday, 2005, Genet, 2008) MoFED (2010) indicated the importance of diversification and commercialization of small scale agriculture, expansion of non-agricultural production in services and industry, capacity building and good governance, off farm employment especially through small enterprises, massive investment in infrastructure development as part of the GTP. UNCDF (2004) states that microfinance playing three key roles in development: First it helps very poor households to meet their basic needs and protect against risks, associated with improvements in household economic welfare, and helps to empower women by supporting women’s economic participation and promotes gender equity. According to AJPH (2007), microfinance is primarily perceived as a development strategy that provides credit and savings services to the poor, particularly rural women, for income-generating activities. Studies show microfinance playing effective role for women’s empowerment since it enhances self-esteem, economic wellbing, social participation, and confidence to negotiate at household and community levels. Mayoux (2005) indicated that in the feminist paradigm, women’s empowerment is seen as an integral and inseparable part of a wider process of social transformation. Among the non-agricultural activities, village savings and loan associations are communitybased organizations that pool members’ savings into loan funds from which members can borrow and offer simple forms of insurance. Loans provided by village savings and loan associations are usually short-term loan (1-3 months) and repaid with interest (Hugh, 2000, Hugh 2003). The Village Saving and lending Association (VSLA) model first introduced by CARE- Niger ‘‘Mata Masu Dubara’’ (MMD, literally meaning, women on the Move (Huge, 2002). To replicate the organization experiences CARE Ethiopia has conducted assessment in 2001 in Kurfa Chelle and Grawa districts. The assessment result shows, among others, absence of microfinance services that suit the socio-economic condition of poor households limit women to engage in income diversification activities (CARE, 2001). Based on that CARE Ethiopia has introduced Village Saving and Loan Association (VSLA) microfinance model and implemented in East Hararghe field office in two successive productive safety-net 2

support programs (HIBRET I from 2005- 2008 and HIBRET II from 2009-2011). The unique characteristics of the village saving and loan associations model doesn’t rely on external financial sources rather members that ranges between 10 to 20 collect regular saving and the saved money use as loan fund for members (CARE, 2004a). The primary objectives of VSLA are income diversification; contribute for household food security, and expansion of household assets through provision of sustainable microfinance services suited to the socioeconomic conditions of poor households in the project area (CARE, 2004b). However, the contribution of the village saving and loan associations microfinance services for women empowerment was not studied.

1.2. Statement of the Problem  

Microfinance has expanded in developing countries since 1990s and significantly increased women’s access to small loans and savings. This increased access to microfinance has been contributing not only to poverty reduction and financial sustainability but also economic empowerment, increased wellbeing, and social and political empowerment for women and thereby addressing goals of gender equality and empowerment (Mayoux and Hartle, 2009). Mayoux (2011), microfinance has widely disseminated in different parts of developing countries and its services are reaching millions of poor women and men, of which some of them receiving the service for the first time. Participation in savings and credit programmes help empower women by increasing their contribution to household income and exposing them to the contexts outside the domestic realm.

Increased income gives women more

bargaining power within the household, increased social and political awareness that puts them in a better position to negotiate in public sphere. Moreover, it increases self-esteem and senses of self-worth have been noted as extra results of women’s participation in microfinance activities (UNCDF, 2002). Though empowerment is not always an outlined objective of most microfinance institustion, but women empowerment is one of the self-evident objectives since microfinance programmes have generally and mostly targeted women as clients (Aliya, 2004) . 3

Moreover, study by SIDA (2004) shows a positive correlation between microfinance and empowerment of poor and disadvantaged people particularly, women, indigenous people, and victims of ethnic or cultural discrimination. This is because of access to financial services, such as savings, credit, money transfers and insurance, contributes to expanding poor people’s choices and improves their ability to respond to opportunities. It helps reduce vulnerability by providing the means to smooth consumption and bridge crises. However, financial services can make vital contributions to the economic productivity and social well-being of poor women and their households, but it does not ‘automatically’ empower women (Kabeer, 2005). The VSLA methodology was adopted widely throughout CARE in 2000 and reached to 2.3 million people in 26 African countries including Ethiopia. CARE embarked on a decade long strategic investment to increase access to savings-led financial services in Africa through the Access Africa Signature program in 2008. Access Africa focuses on expanding CARE’s Village Savings and Loan Associations approach throughout sub-Saharan Africa. The focus on Africa was due to the high percentage of the population living in extreme poverty and the high percentage of its population without access to financial services (Hendricks, 2011) CARE- Ethiopia East Hararghe field office has been implementing village saving and loan associations’ microfinance model in Kurfa Chelle district, first through its Household Income Building and Rural Empowerment for Transformation (HIBRET) project as of January 2005 to August 2009. The second phase of similar project, entitled ‘Linking Rural Poor Households to Microfinance and Markets’ implemented in the same woreda from September 2009 to December 2011 with primary focus on promotion of village saving and loan association microfinance, shoat provision, improved seed, and linking farmers to market. Women empowerment, one of the cross-cutting issues of CARE-Ethiopia assumed an implicit objective of the microfinance model as it is the case for any microfinance program. The projects had organized 230 groups with 10-20 members per group that makes the total numbers of VSLA clients to 3642 of which 85% were women and 1782 (51.1%) members’ linked to formal MFI and accessed loan fund opportunities ranging from birr 1200 to 5000, 4

(CARE Ethiopia, 2011). On the other hand, members own savings reached birr 509,654.00 excluding the compulsory savings deposited at microfinance institution account. The periodic monitoring and evaluation reports of the organization showed women and men who received credit were engaged in different income generating activities and started to accumulate household assets. Given the interconnectedness of the social, political and economic dimensions of empowerment, empowering changes in one dimension may trigger changes in other dimensions. Thus, the improvement of women’s economic empowerment has the potential to lead to positive changes in social and political dimensions. Testing this assumption and identifying relations between VSLA microfinance and the multidimensional empowerment of women, which was vague due to scant empirical studies in the research woreda. Thus, this research was initiated to fill this knowledge gap, particularly in the study woreda of Kurfa chelle.

1.3.

Objectives of the Study

The specific objectives of the study were: 1.

to assess women empowerment status of Village Saving and Loan Association’s women members in the study area;

2. to identify determinants of women empowerment through Village Saving and Loan Associations’ microfinance services in the study area; and 3.

to assess savings and loan use patterns of Village Savings and Loan Associations’ women members in the study area.

1.4. Research Questions 1. Is there empowerment status difference between village saving and loan associations’ members and non-members in the study area? 5

2. What are the determinants of women empowerment through village saving and loan associations’ microfinance services in the study area? 3. Do village savings and loan association members brought changes on loan and credit use patterns compare to non-association members in the study area?

1.5. Significance of the Study

Proper understanding of the dynamics of microfinance and its effect on women empowerment is vital information for planners to design projects and program that focus on women empowerment. There is no research conducted on the subject of women empowerment through microfinance in the study woreda. Thus, findings of this research will be used as a reference for anyone who is interested in the field to conduct further study in the future. On the other hand, different government and non-governmental organizations have been implementing VSLA models, with the primary objectives of improving household income and food security. The empowerment perspectives of microfinance on rural women not well articulated in all development projects designed in the study area. So this study could give insight for further investigation and analysis with support of international donors and humanitarian organizations, such as CARE international. Women and children affairs and Oromiya microfinance institution, and other organaizaions at woreda, zone, and regional levels can use the outputs of the study as an evidence to promote the VSLA’s microfinance as one strategy for women social and economic empowerment. CARE Ethiopia may use result of the study as an evidence to measure the program impacts on women empowerment on the top of social and economic benefits of VSLA. Therefore, the study can have fundamental importance in laying foundation that shows the inherent relationships between microfinance and women empowerment, draw lessons, and recommend policy related issues for future intervention. It is also very important to determine 6

the linkages so as to design interventions that best adapt to local contexts and that would support effective implementation of current program policies.  

1.6. Scope and Limitation of the Study  

This study is only a piece of enormous efforts to unfold realities regarding the relationship between VSLA microfinance with multidimensional women empowerment. Therefore its scope is limited in terms of coverage and depth owing to financial and time resources availability. The research focus is limited to VSLA microfinance model in terms of subject and Kurfa Chelle district in terms of area coverage. On the other hand VSLA is a group business however this study examines empowerment at individual members’ level and it doesn’t deal with the collective empowerment status of the association members. The other aspect of the association with regard to institutional and financial sustainability not dealt under this study.

1.7. Organization of the Thesis  

This thesis is organized into five chapters. The first chapter has already set out background to the study, objectives, research questions, significance of the study, and scope and limitation parts.

Chapter two presents literatures reviewed related to microfinance and woemen

empowerment. Chapter three presents methodology employed for data collection, analysis, and description of the study woreda . Chapter four dealt on result and discussion, and the last Chapter five presents summary, conclusions, and recommendations made based on the preceding chapter findings.

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2. LITERATURE REVIEW

2.1. The Concept of Empowerment

Empowerment is a process that is manifested in more than one dimension. The most frequently identified dimension is women’s absolute wellbeing, where empowerment is seen as the process of improving the welfare of women and girls, and is indicated by outcomes that measure current status with respect to literacy and schooling, health and nutrition, social and political participation, information seeking behaviour, contraceptive use, mobility, selfesteem, and ownership of clothing and assets. Another dimension is women’s relative wellbeing, where empowerment is seen as the process of improving the position of women relative to men within the household, and is indicated by women’s involvement in intra-household processes such as decision-making, control over household income and assets, and control over loans taken (Pradhan, 2003, Ali and Hatta, 2012). Kabeer (2000) argues that one way of discussing empowerment is in terms of their ability to make choices as ‘disempowered’ means one is denied of making any choices. The notion of empowerment, according to Kabeer, is inescapably bound up with the condition of disempowerment and refers to the process by which those who have denied the ability to make choices acquire such ability. It entails a process of change in the sense that it implies the ability to make choices were denied to them in the first place and empowerment enables them to make such choices. As far as those who had such choices earlier, empowerment is meaningless. Based on the above argument Kabeer defines empowerment as the expansion in people’s ability to make strategic life choices in a context this ability was previously denied to them. Empowerment has got three dimensions, resources which form the conditions under which choices are made, Agency is at the heart of all the process by which choices are made, and Achievements, are the outcome of choices. Empowerment (irrespective of gender) is defined as the ability of the people, in particular the least privileged to have an access to productive resources that enable them to increase their 8

earnings and obtain the goods and services they need. Then participate in the development processes that affect their decision. In general, empowerment of women is incomplete and biased if it measures only inequality and fails to include important non-economic dimensions such as decision-making power both at the household and community

levels and over

women’s own bodies and sexuality. These two aspects are interrelated and one without the other cannot result empowerment (Khan and Noreen, 2012).

2.1.1. Definition of women empowerment

Empowerment is defined as the processes by which women take control and ownership of their lives through expansion of their choices (Chamber, 1993, UN, 2001). Thus, it is the process of acquiring the ability to make strategic life choices in a context where this ability has previously been denied. The core elements of empowerment have been defined as agency (the ability to define one’s goals and act upon them), awareness of gender power structures, relation in the social system that foster or hinder empowerment, self-esteem and selfconfidence (Kabeer, 2001). As long as the disadvantaged suffer from economic deprivation and livelihood insecurity, they will not be in a position to mobilize such economic resources (UNDP, 2001). Mosedale (2005) stated as different people use empowerment to mean different things. However there are four aspects were generally accepted in the literatures on women’s empowerment. Firstly to be empowered one must have been disempowered. It is relevant to speak of empowering women, for example, because, as a group, they are disempowered relative to men. Secondly empowerment cannot be bestowed by a third party rather those who would like to empower must claim it. Development agencies cannot empower women rather what they can achieve is to facilitate women to empower themselves through creating conditions favourable to empowerment but they cannot make it happen. Thirdly, empowerment is usually include a sense of people making decisions on matters which are important in their lives and being able to carry them out. Finally empowerment is an on-going process rather than a product. There is no final goal one does not arrive at a stage of being 9

empowered in some absolute sense. People are empowered, or disempowered, relative to others or, importantly, relative to themselves at a previous time. According to Cheston and Kuhn (2002), empowerment is about change, choice and power. It is a process of change by which individuals or groups with little or no power gain the power and ability to make choices that affect their lives. The structure of power who has it, sources, and how it is exercised directly affects the choices that women are able to make in their lives. Microfinance programs can have tremendous impact on the empowerment process if their products and services take these structures into account. According to ADF (2008), empowerment is about people both women and men taking control over their lives, setting their own agendas, gaining skills, building self-confidence, solving problems, developing self-reliance, and expressing their voice. It is both a process and an outcome. No one can empower other, only the individual can empower herself or himself to make choices or to speak out. However, some institutions can support processes that can nurture self-empowerment of relegated individuals or groups. Strandberg (2001) empowerment is like obscenity, you don’t know how to define it but you know it when you see it. The quote captures the fact that most people have an intuitive understanding what empowerment means. Rowlands (1997) describe empowerment as a process whereby women become able to organize themselves to increase their own selfreliance, to assert their independent right to make choices and control resources which will assist in challenging and eliminating their own subordination’. The World Bank and many other development agencies describe empowerment as enhancing an individual’s or group’s capacity to make choices into desired actions and outcomes (World Bank, 2007). According to Swain and Wallentin (2008), woman empowerment is a multi-dimensional process which intersects the woman’s personal, family, social, cultural, economic, and political space. Moreover, behavioural changes in the woman, her spouse and other members of the household are also important component of women empowerment. Woman’s response on a possible situation of verbal, psychological, emotional and physical abuses are all 10

indicative of changes that might ultimately impact women empowerment. Increased selfconfidence along with greater involvement in all decisions of the family members may be inferred as greater empowerment. UNFPA (2011) women’s empowerment is essential for achieving gender equality and includes four main components. Integral to women’s physical and emotional well-being, which are fundamental to achieve equal political, economic, social and cultural rights. The four components include the right to have the power to control their own lives, both within and outside home that endows women with the freedom to pursue employment and maintain an income. The second is the right to have opportunities and access to, which enables women to increase financial and non-financial assets and resources, including savings, land, business acquisitions, food, medical care, and family planning needs. The third component is about the right to have and determine choice within the household and marriage, including choices on the use of earnings, justification in refusing sexual intercourse and decisions about how many children to have. The last is about sense of self-worth that relates to protecting domestic violence and the development of confidence within both at home and the society. Mayoux (2000) empowerment as a process of change in power relations that is both multidimensional and interlinked. She has also laid out a framework that is useful for developing strategies for women’s empowerment. These are, Power within, enabling women to articulate their own aspirations and strategies for change. Power to, enable woman to develop the necessary skills and access to productive resources to achieve their aspirations. Power with examine and articulate women’s collective interests, to organize to achieve them and link with other women’s and men’s organization for change. Power over, it deals on changing the underlying inequalities in power and resources that constrain Women’s aspiration and ability to achieve them.

2.1.2. Operational definition of empowerment

According to World Bank (2002), ‘‘empowerment’’ has been used to represent a wide range of concepts and to describe a proliferation of outcomes. The term has been used more often to 11

advocate for certain types of policies and intervention strategies than to analyse them, as demonstrated by a number of documents from the United Nations (UNDAW, 2000, UNICEF, 1999), the Association for Women in Development (Everett, 1991), the declaration made at the Micro-credit Summit (DFID, 2000). IFPRI (2012) defined women empowerment as generally focusing on the expansion of an individual’s ability to advance the goals and ends of the individuals to values rather than acting solely to avoid social condemnation or direct coercion. The same source indicated that Indirect, or proxy, measures of empowerment traditionally focus on the possession of resources necessary for empowerment or the determinants of being empowered, such as education or asset ownership, rather than on empowerment itself. Narayan (2002) describes empowerment as “the enhancement of assets and capabilities of diverse individuals and groups to engage, influence, and hold accountable the institutions which affect them.” social inclusion is defined as “the removal of institutional barriers and the enhancement of incentives to increase the access of diverse individuals and groups to assets and development opportunities.” Bennett notes that both of these definitions are intended to be operational, and describe processes rather than end points. The empowerment process, as she characterizes it, operates “from below” and involves agency, as exercised by individuals and groups. According to IFAD (2011), the logic of microfinance’s potential for empowerment is similar to the economic model of empowerment. microfinance makes women economically independent by putting capital and financial resources in their hands, economic independence results in higher bargaining power for women in their households and communities, and subsequently results in higher prestige and self-esteem. Here the functions of microfinance are synchronous with its potential to empowerment. Microfinance has been seen as contributing not only to poverty reduction and financial sustainability, but also to a series of ‘virtuous spirals’ of economic empowerment, increased well-being and social and political empowerment for women themselves, thereby addressing goals of gender equality and empowerment (Mayoux and Hartl 2009). 12

Empowerment through microfinance is identified and measured in various dimensions such as impact on decision-making, on self-confidence of women, on their status at home, on family relationships and the incidence of domestic violence, on their involvement in the community, on their political empowerment and rights (Cheston and Kuhn 2002). However, for the purpose of this study, women empowerment is operationalized as the expansion of economic activities and assets of women to participate in public meetings influence to make decisions, use contraceptives, awareness on the legal rights, aspiration, and control and hold accountable institutions that affect their lives. In the context of this definition, institutions include not just organizations but also the rules of the game. On the other hand, assets refer to financial, human, physical and social assets as conceptualized in the definition of livelihoods by department for international development (DFID). That is, financial assets, cash savings, access to loans and other financial services. Physical assets are housing, livestock, jewellery, land, consumer durables, and tools. Human assets are about good health, ability to labour, knowledge and skills. Social assets indicate the networks, membership in associations, groups or village committees, relationships of trust and access to wider institutions of society.

2.2. Microfinance    

Microfinance refers to a diverse array of financial services, including credit, savings, insurance, money transfer, that designed to assist the poor, who have no access to financial services (SIDA, 2004, and UNCDF, 2004). Dr. Mohammad Yunus launched the microfinance movement when, as an economics professor, he was exposed to the suffering of the starving during the famines following the partition of Bangladesh. He began visiting local villagers to see what he could do to help, and soon discovered that small loans, initially only twenty-seven dollars, made a big difference in the lives of the poor. He went on to develop Grameen Bank in the 1970s, which became the first for-profit company to win a Nobel Prize when Yunus and Grameen won the Nobel Peace Prize in 2006 (Lakwo,2007). 13

. Microfinance is the provision of financial services to low-income clients, including consumers and the self-employed, who traditionally lack access to banking and related services. Microcredit, or microfinance, is banking the un-bankable, bringing credit, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral (Sarumathi and Mohan, 2011). Robinson (2001) microfinance refers to small-scale financial services primarily credit and savings provided to people who farm or fish or herd, who operate small enterprises or microenterprises 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 to other individuals and groups at the local levels in developing countries, both rural and urban. SIDA (2004) define microfinance in terms of loan amounts or lending methodology. Access to financial services, such as savings, credit, money transfers and insurance, contributes to expanding poor people’s choices and improves their ability to respond to opportunities. UNCDF (2002) women’s use of financial services can increase their income and economic security, enhance their independence, reduce the vulnerability of their families, and stimulate local economies. Microfinance 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 banks or other formal financial service providers (Lafourcade et al., 2005). Microfinance is a cost-effective means of contributing to development and poverty alleviation, because any dollar invested is used more than one time. However, it also takes considerable effort in terms of human resources, financial planning and the shaping of a supportive 14

infrastructure to bring microfinance institutions to such a scale that they can play a role as an integrated part of the broader financial sector. Once microfinance institutions have matured, profits can actually be high, enabling them to expand and increase outreach to the poor through internally generated funds (UNCDF, 2003, Khan and Noreen, 2012). Dunford (2000) discussed the term ‘microfinance institutions’ covers a broad spectrum from traditional businesses, for which social objectives are only a by-product to traditional social service organizations and reaching the poorest is the prime objective. In between are social enterprises, which are explicitly aiming at reaching very poor people but at the same time are aiming at sustainability. Hashemi and Rosenberg (2006) indicated microfinance or formal financial services for the poor helps people fight poverty on their own terms, in a sustainable way. Poor people use loans, deposits, and other financial services to reduce their vulnerability, seize opportunities, and increase their earnings. Indirectly, microfinance improves schooling, health, and women’s empowerment. In the same reference, in most settings however microfinance does not reach the people at the very bottom of the socioeconomic scale the “poorest’’ groups because of the extremely poor people may prefer non-financial assistance to loan considering loan as debt .

2.2.1. Microfinance in Ethiopia

Microfinance services has been provided in Ethiopia mostly by donor funded programs through NGOs and government institutions (Yigerem, 2010). However, the formal microfiance services started since

1994/5 and regulatory framework for licencing and supervision of MFIs was introduced in 1996 and most of the donor funded micro credit programs that were carried out by NGOs were transformed to regulated institutions. The regulatory framework of microfinance institution proclamation No. 40/1996 encouraged the spread of microfinance institutions as it authorized, among other things legally accept deposits from the general public, diversify sources of funds, draw and accept drafts and mange funds for the micro financing business (Getaneh and Carter, 2007). 15

According to Sebstad (2002), the Ethiopian microfinance industry has undergone tremendous growth and development in a very short period of time. Currently more than 20 registered MFIs provide savings and credit services to more than 500,000 households in rural and urban areas across the country. To put the extraordinary growth of Ethiopian MFIs in perspective, as of December 2000, Dedebit Credit and Savings Institution (DECSI) was the fourth largest MFI in Africa in terms of total number of clients (187,470). While Amhara Credit and Saving Institution (ACSI) considered the sixth largest MFI in Africa with a total of 143,520 clients. Only eight MFIs in Africa had more than 100,000 clients. In similar study conducted by Yegerem (2010) the number of active borrowers reached to 2.3 million at the end of 2008, which the four regional state backed Microfiance institutions were the leading roles in reaching hundred thousands clients, ACSI, 687,586, Dedebit, 412,293, Oromiya 363,469, and Omo 339,018 clients in two years time since the regulatory proclamation introduced (Yegerem,2010). Moreover, government of Ethiopia has designed development strategies, such as “Sustainable Development and Poverty Reduction Programme” that follows Agricultural Development Led Industrialization (ADLI) strategy emphasized rural finance services as the main policy focus that stressed as one of the four pillars. The shortage of capital is seen as the most constraining factor when the available number of working age population and the potential cultivable land is considered (Getaneh and Carter, 2007). The microfinance proclamation was issued in order to provide for legal regime of microfinance institutions within Ethiopia's monetary and financial policies. Besides, it was meant to fill the missing gap that the monetary and banking laws of the country did not provide for microfinance institutions that cater to the credit requirements of peasant farmers and micro-level business operators (Wolday, 2003). Consequently, the main objective of the microfinance institutions is the delivery of financial services (providing micro-loans, micro-savings, micro-insurance, money transfer, etc) to a

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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 (Ibid). The second phase of “Plan for Accelerated and Sustainable Development to End Poverty” PASDEP (2005-2010) Ethiopia’s guiding strategic framework document provides strong emphasis to micro-enterprise and self-employment supportive intervention based on key principles such as: (a) enabling people, communities and business crowding – not crowding out personal responsibilities, (b) achieving the objectives through decentralization, private sector promotion and liberalizing market controls while reorganizing market failure, and (c) targeting services to vulnerable groups (FDRE, 2006). Similarly, the five years government growth and transformation plan also gave

emphasis on promotion of livelihoods

diversification through off-farm income and small scale agricultural commercialization, (MoFED, 2010).

2.2.2. Village saving and loan associations’ microfinance

The village savings and loan associations microfinance model is exclusively categorized under the community saving and credit groups that collect members saving to provide loan and small insurance services to its members. Village saving and loan associations microfinance model was first developed by CARE-Niger’s ‘‘Mata Masu Dubara’’ (MMD, meaning Women on the Move.) project. The model was developed capitalizing on local experience of traditional accumulating saving and credit associations called ‘‘tontines’’ (Hugh, 2000). According to Hugh Allen (information obtained through e-mail communication), currently village saving and loan associations are providing services in 23 countries around the world; of which 18 countries are in Africa, two in Latin America and the rest three in Asia. Village saving and loan associations are autonomous and self-managing time-bound accumulating savings and credit associations (ASCAs). In a single association, 15 to 25 selfselected people save regularly and borrow from the group fund. Loans are repaid with interest between one to three months. Loans are provided both for consumption and income generation 17

purposes. Members also have either separate social fund or provide interest free loan for their members in case of emergencies. In short, village saving and loan associations provide savings, loan and insurance services for their members. If members want to share out their asset, all or part of their financial asset is divided among the members in proportion to their savings on a date chosen by the members, usually after about a year. This payout is called the ‘‘action audit’’. After the share out, the associations mostly re-form immediately and start a new cycle of savings and lending (Hugh and Mark, 2007). The role of support organizations is to train these associations on how better to operate their saving and loan activities on a four-phase curriculum that lasts for about nine to ten months. After completion of the training, the associations can function with no external support (Hugh, 2002). The village saving and loan associations microfinance was first introduced in Kurfa chelle woreda in January 2005 by Household Income Building and Rural Empowerment (HIBRET) Project. The associations are trained for 9-10 months on four-phased training module; namely the introductory phase, the intensive/training phase, the development phase and the maturity phases. During the introductory phase (covers two to three weeks), the members self-select and form their association. The intensive/training phase covers 15 weeks. In this phase, the facilitator visits the association in every meeting. In the first three weeks, the association gets theoretical training on the meaning and role of association, on the role of the general assembly and executive committee, on savings and loan management, on bylaws, on conflict management and in selection, planning and management of income generating activities. In the remaining 12 weeks, members of the association are assisted to practically apply what they have trained theoretically. However, in the meantime, they start saving after the third week and loan services (both investment and consumption) after the tenth week. Loan and saving services are provided only for members. All decisions relevant for best functioning of the association like amount of saving, loan ceiling, interest rate, types and rates of fines are decided by members and included in their bylaw. The sole sources of capital for the association during the training cycle are their members. However, the association can take loan either from formal microfinance institutions or cooperatives once they graduate from the 18

external organization (CARE-east Hararghe). In the development phase (lasts for 12 weeks), the facilitator visits the association four times and assists them only if requested or if s/he sees any deviations from what they were trained. In the maturity phase (lasts for 10 weeks), the facilitator visits the association two times during their meeting. She or he facilitates graduation of the association and links them with the district cooperatives promotion office if they show interest to develop into cooperatives. Moreover, trains them for three to five days on selection, planning and management of income generating activities. After graduation, the association starts to work independently (CARE, 2004a). The delivery mechanism envisioned by the Village saving and loan association concept is promising for several reasons. First, this mechanism is simple and thus limits transaction and administrative costs, and also reduces the need for complicated management structures and record keeping. Second, the VSLA concept is flexible, and can be altered to meet the basic needs of clients by providing a simple savings and insurance products that can be used to fund every day needs, lifecycle events and emergencies. Third, the VSLA model promises positive real rates of return of interest on savings and loans, making this model attractive even in a highly inflationary environment. Finally, this model has the potential to achieve long-term sustainability because it is funded by the participants themselves and does not rely upon external sources of capital (Hugh, 2002).

2.2.3. Microfinance and livelihoods diversification

The livelihood diversification activities are of increasing importance for women empowerment (Bryceson, 1996 and 2000; Bryceson and Jamal, 1997) through additional income earning and improvements in family welfare (Ellis, 1999) supplemented by self-help micro credit (Hulme and Mosley, 1996, Johnson and Rogaly, 1997). The self-help micro credit programmes have play valuable roles in reducing vulnerability of poor households through asset creation, income and consumption smoothing, provision of emergency assistance, and empowering women to have control over household assets, increased self-esteem and knowledge (Zemen, 2001). 19

Mayoux and Hartle (2009) the expansion of microfinance since the 1990s has significantly increased women’s access to small loans and savings. This increased access to microfinance has been contributing not only to poverty reduction and financial sustainability but also economic empowerment, increased wellbeing, and social and political empowerment for women and thereby addressing goals of gender equality and empowerment. Moreover, Ellis (2004) increasing women’s access to microfinance services can lead to income diversification and women’s roles in household financial management may improve, and enables women to access significant amounts of money with full control and decision right. Another study show higher non-farm earnings result in higher agricultural yields and improving natural environments (Falendra, 2007). According to Barrett et al. (2001), there are multiple motives for the households and individuals to diversify assets, incomes, and activities. The first set of motives comprise what are traditionally termed “push factors”: risk reduction, response to diminishing factor returns in any given use, such as family labour supply in the presence of land constraints driven by population pressure and landholdings fragmentation, reaction to crisis or liquidity constraints, high transactions costs that induce households to self-provision in several goods and services. The second set of motives comprise “pull factors”: realization of strategic complementarities between activities, such as crop-livestock integration or milling and shoat production, specialization according to comparative advantage accorded by superior technologies, skills or endowments. According to Daniel and Johnson (2004), diversification can either refer to an increasing multiplicity of activities (regardless of the sector), or it can refer to a shift away from traditional rural sectors such as agriculture to non-traditional activities in either rural or urban space i.e. sectoral change. Schwarze and Zeller (2005) review of empirical studies concerning the share of rural nonfarm income shows its importance for rural households. According to this source, on average the non-farm income contribute upto 29% of the total income of rural households in South 20

Asia. The major reasons to do households diversify their activities are to increase their income from activities outside the usual agriculture. Diversification is a strategy or copping mechanism by which individual adopt to reduce, or alleviate, risk of exposure and vulnerability to natural and manmade economic problems. In rural area farmers diversify by adopting a range of activities, such as farm income, off-farm income and non-farm income (non-agricultural income sources, such as non-farm wages and self-employment (Ellis, 2000, Scoones, 2000). This diversification is important for both poor and non-poor households but for different purposes, the poor diversify income for survival while the better off engaged to accumulate wealth (Hamza, 2007). Moreover diversification is the most important characteristic of households income in rural areas of low income developing countries due to the extreme variability of weather, the incidence of disease, pests and fire, and random shifts in international crop prices cause farm incomes to fluctuate unpredictably in these countries (Dimova and Sen,2010).

2.3. Women Empowerment through Microfinance    

Mayoux (2002) found microfinance programmes having significant potential for contributing to women’s economic, social and political empowerment. Access to savings and credit can initiate or strengthen a series of interlinked and mutually reinforcing ‘virtuous spirals’ of empowerment. Majority of microfinance programs target women with the explicit goal of empowering them because women are amongst the poorest and the most vulnerable of the underprivileged social group and helping them should be a priority. Moreover, investing in women’s capabilities empowers them to make choices and contributes to greater economic growth and social development (Sarumathi and Mohan, 2011). Women can use savings and credit for economic activity, thus increasing incomes and assets and control over these incomes and assets enhance woman social and economic status that ultimately leads to empowerment. This economic contribution may increase their role in economic decision making in the household, leading to greater wellbeing for women and 21

children as well as men (Skarlatos, 2004, Swain and Wallentin, 2008). Increased economic role may lead to change in gender roles and increased status within households and communities (Dessy and Ewoudou, 2006). Mayoux (2002) indicated the need for much greater clarity in the underlying vision of microfinance programmes. This clarity entails a definition of empowerment which goes much further than either woman’s access to microfinance access or household-level poverty alleviation. Providing an adequate and non-discriminatory regulatory framework for microfinance needs to be seen as a human rights issue rather than the end aim of gender policy itself. Kabeer (2001) poverty alleviation as measured by increased income is not sufficient for women’s empowerment because intra-household inequalities mean that women do not necessarily benefit from increases in household income, even where they are major contributors. Mayoux (2001) revealed that empowerment is about change, choice, and power. It is a process of change by which individuals or groups with little or no power gain the power and ability to make choices that affect their lives. The structure of power has sources and ways exercised could directly affect the choices of women make in their lives. Hence, microfinance programs can have tremendous impact on the empowerment process if their products and services take these structures into account.

2.4. Indicators of Women Empowerment through Microfinance    

According to Cheston and Kuhn (2002), indicators are not universal. Consequently, we cannot determine which indicators should be selected or how many indicators should be used to measure a given result. The response to these questions depend on the complexity of the results being measured, the level of response available for monitoring impact and the amount of information needed to make reasonably-informed decisions.

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Carolyn and Sebstad (2000) suggested various indicators to determine degrees of empowerment: psychological, informational, organizational, material, social, financial or human, for opportunity structure, the presence and operations of formal and informal institutions, including the laws, regulatory frameworks and norms governing behavior. Lakwo, (2007) used participation in common local activities, changes in decision making position of women, self-esteem, and change in asset base of women as indicators of women empowerment in his study conducted in Uganda. The SEEP network (2000) suggested personal savings, average amount of personal savings in the program, increased self-esteem, increased confidence and more proactive behavior, increased control of resources on the part of women clients and increased decision-making in the business as indicators of women empowerment as a result of participation in microfinance program. Sebstad et al. (1995) mentioned women’s control over resource, increased participation in household decision making and increased community participation as indicators of women empowerment through microfinance. On the other hand, in a study conducted in Haiti, Malawi and Nigeria by the United Nations Capital Development Fund (UNCDF) self-esteem, decision making at household level, decision making at enterprise level and decision making on the use of program loans are used as indicators of empowerment (UNCDF, 2004). Hulme (1999) also suggested individuals control over resources, involvement in household and community decision making, levels of participation in community activities and social networks and electoral participation as indicators of empowerment. According to Shantana (2003), ownership and control over resources, mobility, and participation in active labor force, bargaining power, self-esteem and participation in local election are indicators of women empowerment through microfinance. Malhotra (2002, as cited in Trandley, 2005) used domestic decision-making; finance and resource allocation; social and domestic matters; child related issues; access to or control over resources; and freedom of movement as indicators of women empowerment.

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Birgit (2001) suggested ownership of property and assets, control over resource allocation, enhanced self-confidence and self-respect, increased mobility, leverage in decision making, increased bargaining power, women without negative consequences, increased community participation, knowledge and skill creation as indicators of empowerment for participants of microfinance programs. Women.s ownership of income generating activities (IGA) is also suggested as a strong indicator of women empowerment through microfinance (Mayoux, 2000; Cheston and Kuhn, 2002). According to Hulme (1999), all changes are influenced by mediating processes (specific characteristics of the agent and of the economic, physical, social and political environment) that influence both behavioral changes and the outcomes in ways that are difficult to predict. By the same token, Birgit (2001) mentioned factors that influence the change process to be age, marital status, educational status/functional literacy, household size, dependency ratio, years of membership, degree of remoteness, amount of current loan, cumulative amount of loan received and market access. SEEP network (2000) also suggested age, marital status, years of formal education or functional literacy, household size, dependency ratio and degree of remoteness as independent factors affecting the change process.

2.5. Measuring Women Empowerment through Microfinance  

Given the historical underlying reason of the emergence of microfinance, poverty reduction is the end-outcome. However, women’s empowerment may be termed a spillover impact of intermediate outcomes (Banqui, 2004). At the individual level, impacts are found in women’s empowerment and increase in personal savings among others (Carolyn and Sebstad, 2000; Hulme, 2000; Birgit, 2001). There are those who argue that empowerment lies beyond the sphere of what can be measured. Others consider attempts to do so to be dangerous in terms of the center asserting control of the periphery (Sarah, 2004). The basic reason is measuring processes is more complicated than measuring products and there are obvious contradictions inherent in any attempt to prescribe 24

empowerment. However, Sarah argues that, though difficult, measurement must be undertaken for there can be little point in funding an activity if it is impossible to tell whether or not it has been successful (Ibid). Similarly, according to World Bank (2002), if empowerment cannot be measured, it will not be taken seriously in development policy making and programming. Moreover, impact assessments are promoted by both the sponsors and implementers of programs so that they can learn what is being achieved and improve the effectiveness and efficiency of their activities (Hulme, 1999). The researcher also supports the idea that empowerment can be measured. Mixes of assessment methods are most appropriate for any given study (Hulme, 1999). The quantitative approach, with proper sampling, allows for the measurement of many subjects’ reaction to a set of questions. The results can be compared and analyzed statistically; they also can be generalized to a larger population within known limits of error (SEEP network, 2000). Hence, it is more convincing to skeptical outsiders (Birgit, 2001). The qualitative methods, on the other hand, enjoy richness in detail and understanding of differential impact and have the ability to pick up unexpected and immeasurable impact (Ibid). Moreover, qualitative methods provide the context within which one can more fully understand results. They capture what people have to say in their own words and describe their experiences in depth. Qualitative data provides the texture of real life in its many variations; it gives insight into the reasoning and feelings that motivate people to take action (SEEP network, 2000). Hulme (1997) argues that scientific quantitative method ignores the complexity, diversity, and contingency of winning a living; it reduces causality to simple unidirectional chains; and pretends to measure the immeasurable. Similarly Wright (2005) cautions the use of econometric modeling though necessary is not always appropriate. The use of dummy variables does not permit unpacking the causal chain to understand why effects are, or are not, being found. Many of the variables used as counterfactual inadequately present the entire arena within which a woman client negotiates, contests, and (re)produces her livelihoods and gender relations.

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In a study conducted on United Nations Capital Development Program supported microfinance institutions in Nigeria, Malawi and Haiti, the empirical study could not clearly establish a link between the empowerment of microfinance institution clients and programme participation. Anecdotal evidence of the qualitative research revealed, however, already high levels of empowerment among respondents (UNCDP, 2003). Wright and Copestake (2004 as cited in Lakwo, 2007) therefore, suggest the use of quantitative, qualitative, and participatory methods concurrently for better triangulation and omission of attribution challenges. With regard to quantitative measures of empowerment, (Hashemi et al. 1996, as cited in Mark et al., 2003) created an index of empowerment through a linear weighted combination of individual empowerment indicators. They established a cutoff point at the 30th percentile (arbitrarily chosen) such that women who score above this cutoff are labeled empowered and those who score below it are labeled un-empowered. This system reduces the measure of empowerment, previously existing along a continuum, to a single binary outcome for each of eight categories. These eight categories are further compacted into a "composite empowerment indicator" such that a woman was labeled empowered overall if she had been labeled "empowered" in at least three of the eight categories and was labeled un-empowered otherwise. Again, the choice of five-out-of-eight as the cutoff mark by which to reduce the eight categorical binaries to one single binary represents an arbitrary choice on behalf of the researchers. In the same source (Mizan, 1993) also used an index, called the Household Decision Making (HHDM) Scale, which is computed from answers to questions regarding: decisions of food purchase, education and marriage of children, expenses on medication for self and husband, investment, woman's earnings in business, purchase and sale of land, hiring of outside labor, purchase of agricultural inputs, providing financial support to husband's family, and purchase of clothes for self and other household members. The coding used is as follows: decision made by husband only=1, decision made jointly by husband and wife=2, and decision made by wife only=3. Thus, the decision making scale registers a higher value for a higher level of female bargaining power. Mizan's study uses a sample of 100 participating women chosen from two

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villages (50 women in each village) and 100 non-borrowers, without control for self-selection into the programs. In a study conducted in Bangladesh by Shahnaj and Leonhauser (2004), they developed a cumulative empowerment index (CEI) by adding the obtained scores of six empowerment indicators to measure empowerment. However, this study adapted nine empowerment indicators pertinent to microfiance and women empowerment and the total scores were leveled in to five equal parts, represtning very low, low, medium, high, and very high empowered categories.

2.6. Empirical Findings on Women Empowerment    

Kato and Kratzer (2013) study conducted in Tanzania through collecting quantitative and qualitative data the result shows that Women members of microfinance institutions (MFIs) are more empowered compared to non-members in non-program areas. In total 454 women (305 members of MFIs and 149 non-members) participated in the survey and 10 women in the indepth interviews. The data were analyzed using Mann-Whitney U test. The results show a significant difference between the women members of MFIs and non-members in the dependent variables related to women empowerment. Women members of MFIs have more control over savings and income generated from the business, greater role in decision-making, greater self-efficacy and self-esteem, and greater freedom of mobility and increased activities outside home. Sarumathi and Mohan (2011) study conducted on self-help microfinance model taking 181 rural women samples and both the qualitative and quantitative data were collected and analyzed using percentage, simple correlation coefficient, paired t-test and cross tabulation methods. The result showed microfinance and SHGs are effective in reducing poverty, creating awareness, and ultimately contributes to psychological wellbeing and social empowerment among rural women.

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Women’s ability to influence or make decisions that affect their lives and their future choice is considered as one of the principal components of empowerment by most scholars. It is much less clear, however, what types of decisions and what degree of influence should be classified as empowerment in different contexts. In spite of the difficulties, as cited by

(Cheston and

Kuhn, 2002) in a study conducted by the women’s empowerment program in Nepal showed that an average of 89,000 out of 130,000 or 68% of women that program experienced an increase in their decision-making roles in the areas of family planning, child marriage, buying and selling property, and sending their daughters to school, which all areas of decision making was traditionally dominated by men. In a study conducted in Peru by AIMS (assessing impact of microfinance institutions), at the individual level the findings are mixed. On the positive side, micro-credit enabled female borrowers to have control over financial decisions, and be prepared for the future. But on the negative side, the study team did not find any positive impact of micro-credit on personal savings, self-esteem and respect from others (Baqui, 2004). According to the same source, in a study conducted in Bangladesh to assess the impact of rural development program credit on women’s empowerment, around 45 percent of the female members were involved in income generating activities, an increase of about 17 percentage point from the pre-membership period. Although not overwhelming, an increasing number of female members have control over their own savings and participated in the decision making process. Economic dependency on husband income has declined over time and become more respected than before. Similarly, Kabeer (1997) in her study of Small Enterprise Development Program (SEDP) in Bangladesh found that although SEDP contributes for women empowerment and well-being benefits substantially when women controlled their loans and used them for their own incomegenerating activities. Hence, bringing financial resources to the household in the form of credit was enough to secure at least some benefits for the majority of women. There are of course two differing opinions on the impact of microfinance. The one who claims as microfinance is a ‘magic bullet’ to solve rural poverty and a way for empowerment while others who are dismissive of its abilities as a cure-all panacea for development. Moreover, 28

study of Kabeer (2005) indicated that financial services providing vital contributions to the economic productivity and social well-being of poor women and their households, but it does not ‘automatically’ empower women. Another study conducted in Kenya revealed evidence of greater recognition and respect for women by spouses and other family members as well as the wider communities in which they operate as a result of their participation in microfinance programs (Otto et al., 2002). Using logistical regression analysis, Hashemi et al. found that women’s access to credit contributed significantly to the magnitude of the economic contributions reported by women; to the likelihood of an increase in asset holdings in their own names, to an increase in their exercise of purchasing power, in their political and legal awareness as well as in the composite empowerment index (Kabeer, 1999).

Trandley (2005) used Binary Logit to study

determinants of women school teachers’ empowerment in Chennai city of India. On the other hand, (Shahnaj and Leonhauser, 2004) used multiple regression to study determinants of rural women empowerment in Bangladesh. Derege (2008) conducted study on women empowerment through microfiance in CARE Ethiopia East Hararghe zone at Grawa woreda applying descriptive statstics and econometrics logistic regression model for data collected from 200 VSLA members abnd non-association memebrs and result shows there was strong and positive association between women empowerment and VSLA microfiance. In the same source women participation in VSLA enhanced members’ exposure to and

participation in various extension services, better

community participation, increased bargaingin power within the household and community levels, improved decision making power compare to non-association members.

2.7. Conceptual Framework of the Research

All programs have a theory of action that links implementation with outcomes. In the case of micro-finance impact assessment, one needs to conceptualize how micro-finance leads to changes and what changes are reasonable to expect given the service provided and loan 29

conditions (Hulme, 1999). Microfinance impact can be assessed at four levels: at individual, at household, at community and at enterprise level (Hulme, 1999, SEEP network, 2000, Birgit, 2001). Microfinance impact at individual level is reflected in increased empowerment (Sebstad and Gregory, 1996, Hulme, 2000, Birgit, 2001). The conceptual framework of the study adapted from the conceptual microfinance impact model developed by Sebstad et al., 1995.

Fig.1. Conceptual framework modified from (sebstad et al, 1995)    

Consequently, the conceptual framework of the study is developed with the following assumptions. 

Women’s membership in village saving and loan associations microfinance intervention

improves their empowerment status. This improvement in empowerment status is manifested in increased self-esteem, increased bargaining power, increased participation in household decision making, increased mobility, increased knowledge, increased participation in local common activities, increased control over household resources, ownership of own economic activity and ownership of assets by women; 30

 Women empowerment through village saving and loan associations microfinance among others can be influenced by personal and demographic, institutional, socioeconomic and psychological factors.  Women participation in village saving and loan association microfinance can improve their saving and loan use behaviour.

31

 

3. RESEARCH METHODOLOGY      

3.1. Description of the Study Area  

The study woreda Kurfa chelle is one of the 19 woredas of East Hararghe administrative zone in Oromiya regional state. The woreda town named Kurfa chelle is located at 567km away from Addis Ababa, 57km from zonal capital town of Harar, and 62km from Dire Dawa city administration. Astronomical, Kurfa chelle district lies between 9007’and 9020’N latitude and 41043’ and 42002’E longitude to the south east of Harar town. The district is surrounded by Bedeno woreda to the west, Kersa woreda to the North-West and North, Haramaya woreda to the East and North-East, Fedis woreda to the South-East and Grawa woreda to the South and South-West directions (ZOFED, 2011). Kurfa woreda has classified into 18 rural and one urban kebeles. The total land area of the woreda is 301.77 Km2 that shares 1.33% of the total area of East Hararge zone. The land scape of the woreda is dominated by mountenius terrain, plateaus, and hills. There are several mountain peaks whose elevations rise over 2000 m.a.s.l, such as mount Garamulata (the highest peak in the zone 3405m) and part of its chain (3237m), Dedero (2645m) and Gebiba (2008m). These mountain peaks have large piles of tertiary volcanic basaltic trap-series lava on their tops and surrounded by deep faulted valleys. The general elevation of the district descends from North to the Southeast direction. The lowland area whose elevation extends from 1400-1500m.a.s.l covered the smaller portion of the district. This area includes Dawe and Gafra valleys as well as many isolated hills. According to Kurfa chelle woreda agriculture development office data, 35% of woreda are plain land, 45% dissected plateau, and the rest 20% covers valleys (WADO, 2010). According to Kurfa chelle agriculture development office data the woreda has three agro ecological zones. Dega (highland) 31%, Woina-dega (midland) 50%, and kola (Lowland) covers 19% of the total area. The annual average rainfall ranges between 1200 and 2000mm for highland agro-ecology zone, midland 600mm and 2000mm, and Lowland area found 32

between 410 and 820mm. However, the rainfall distributions in all agro-ecological zones were erraic with varied intensity from light to torrential rain showers experienced in the woreda. The annual minimum and maximum tempreture for each agroecological zone are, 100 and 150c for Dega (highland), 150c and 200c Woina Dega (Midland), and 200c and 250c

Kolla

(Lowland) areas. According to CSA (2007) census data the total population of Kurfa chelle woreda was 58,712 and the current (2013) population figures at 2.5% annual growth rate estimated to rise more than 65,000. The proportion of male 50.5% and female 49.5% and from the total population about 9.8% dwelled in town and the remaining assumed in 18 rural kebeles. Population density is 195 people per sq km that indicates the district as one of the most populous districts in East Hararghe zone. Most of the population are belong to Oromo ethnic group and 99% of them are Islam followers. Agriculture is the main livelihoods sources of the woreda people. Mixed farming, growing cereals, cash crops, and livestock rearing is the common practice and soruces of economy for rural households. The woreda is predominantly growing cereasl, such as maize, sorghum, wheat, and barley for domestic consumption while potato, haricot beans, Khat, and coffee produced as a cash crops. Livestock rearing is a common practice in all agro-climatic zones of the woreda and farmers are generating considerable income from this sector, particularly from traditional oxen and goat fatting activities. The landuse patterns of the woreda, 54.1% is cultivated land for growing various cereals crops such as maize, sorghum, wheat, barley, and pulses, 2.1 % used for pasture or grazing land, 4.9 % forest and woodland , 4 % shrubs and bushes, 20.2% degraded/miscellaneous land, and 14.7% used for social services. In addition the off-farm and non-farm income sources, such as petty trade, casual labour, handicraft, participation in productive safety net activities, and embroideries are common both in urban and rural kebeles. The major agriculture problems are small landholding size in the highland area, land degradation and fragmentation, low agricultural input use, absence/shortage of improved crops variety and livestock breeds, drought, and erratic rainfall distribution affect farmers efforts to food security and the woreda has been depend on external food assistance for more than two decades (WADO, 2010). 33

The woreda has all weather roads that connect with Harar, Dire Dawa, Grawa, Bedeno and Meyu towns. There is only one senior secondary school, one junior high school, and 24 elementary schools in the woreda. There are four health centres and 18 health posts but no hospital in the woreda at time of data collection. The woreda has digital telecommunication services and 24 hours hydroelectric power service. There are two main market centres in the district at Kurfa chelle and Dawe towns and additional two small rural market centers at Alemdrom and Wajjira kebeles. The district has no formal bank services but there is microfinance institution (Oromia Credit and Saving Share Company) become operational in the study woreda. Moreover, the study woreda has 15 multipurpose farmers’ cooperatives of which two of them are organized as saving and loan cooperatives.

Kurfachelle Oromia East Hararghe zone 

Ethiopia

Fig.2. Map of the study woreda  

34

 

3.2. Sampling Procedures  

In order to fulfil the objectives of the study, the samples were taken from both beneficiaries and non-beneficiaries of the microfinance schemes. In the study area, there were two types of micro-credit services made available to the needy farmers. One is the micro-credit available through VSLAs that formed with the necessary technical support of CARE projects. The second micro-creit services provided through formal microfinance institution run by Oromiya Saving and Credit Share Company (OCSCCO). A large number of women in the study area were participating in both, while a few clients were utilizing only VSLA micro-credit service. However, this study includes association members who benefited from both micro credit services at least for three years and above. Multi-stage stratified random sampling procedures were applied to draw samples for the study. Kurfa Chelle district has a total of 18 rural kebeles, however village saving and loan associations were operational only in 11 kebeles. For the purpose of this study, the 11 kebeles where Village Saving and Loan Association operational were selected purposively as a sampling frame. Then, from 11 VSLA operatonal kebeles , four kebeles selected based on their relative distance from district town taking 14km as a cut-off point. Thus, based on the cut-off distance those kebeles greater than 14km considered as far while those kebeles less than the cut-off point considered as close/near in a relative terms. The 14 km is the average distance of VSLA operatonal kebeles from district town, which showed the nearest Kebele distance was 1km and the far one was 28km. The purpose of stratifying the VSLA kebeles into far and near was primarly to avoid biasedness on area selection, far kebeles from district town assume less exposure to extension services, limited access to market information, less extension participation due to limited outreach of extension providers due to poor social infrastructures development in remote kebeles, which have trade-off with level of empowerment of women and the revers situation was assumed for nearby kebeles. Based on the above assumption, two far kebeles (Alemdrom and Rasa Jeneta) and the other two near kebeles (Arele Guda and Hula Jeneta) were randomly selected through drawing 35

lottery ballots from both distance categories. The samples from four kebeles were determined through applying probability Proportional to Size (PPS) sampling procedures. Then the actual sample respondents of association members were selected using simple random sampling technique applied reference to the name list of credit users obtained from the selected four kebeles. While the number of non-credit users samples were selected equal to the total number of credit users and similar samples selection system (PPS) was applied on list of non-credit users information obtained from four target kebeles. Finally a total of 180 sample women, that is 87 respondents from near kebeles and 93 respondents from far kebeles were drawn using simple random sampling technicque at each sample kebele.

Table 1. Distribution of sampled respondents in sample kebeles  

Sample Frame Sample Kebele

Sample Size

VSLA

Non-

VSLA

Non-

members

Members

Members

Members

Total

Arele Guda

327

613

18

28

46

Hula Jeneta

355

466

20

21

41

Alemdrom

483

527

27

24

51

Rasa Jeneta

435

377

25

17

42

Total

1600

1983

90

90

180

Source: Secondary data obtained from VSLA and Kebele Administration

3.2.1. Sample size determination Sample size is depends on the required precision, the variance of variables among the total population and the sampling technique. There are several approaches to determine the sample size. These include using a census for small populations, imitating a sample size of similar studies, using published tables, and applying formulas to calculate a sample size. This study applied a simplified formula provided by Yamane (Yamane, 1967 cited in: Yilma, 2005) to determine the required sample size at 95% confidence level, degree of variability=0.05 and level of precision= 8% (0.08). 36

------------------------------------------------------1 Where n is the sample size, N is the population size (total households), and e is the level of precision. The above formula required a minimum of 155 households but this study was carried out on 180 households. From the sampling frame 90 women from the association members who have participated in VSLA and microfinance institution for more than three years were randomly selected and another 90 non-association members selected following the same procedures. The total sample size of the research was 180 women from both association members and non-members that randomly selected from four kebeles.

Fig. 3. Schematic presentation of sampling design  

37

3.2.2. Data type and methods of data collection

For this study, both primary and secondary data were collected and analyzed. The data were quantitative and qualitative in nature. The primary data were collected from both village saving and loan association member and non-member respondents through conducting household survey. The primary quantitative data were gathered through survey of the sample respondents using pre-tested interview questionniare. In addition primary qualitative data were collected using open ended question from respondents, such as key informants (KI) and participants of focus group discussions (FGD). Secondary data of quantitative and qualitative in nature, such as quarterly reports, evaluation reports, project proposals, woreda and zone profiles, and other basic data collected from government and non-government organizations operating in the woreda. Moreover, separate focused group discussions (FGD) were held with mix of women from both association members and non-members in each keble that address a total of four groups (one per kebele) for in depth discussion. These FGDs were held with the help of FGD guide and involvement of the researcher himself. In addition, Key Informant Interviews (KII) was conducted with community leaders, functionaries of GOs and NGOs, and community facilitators of microfinance schemes. These informal interviews have been conducted with help of checklists. Apart from FGDs and KIIs, selected case studies were conducted with individuals for magnified analysis of success stories and failure stories of beneficiaries. For all these qualitative data collection, the researcher himself participated and captured voice of the respondents using pocket tape recorder and use the voice to cross-check the accuracy of data at time of transcription.

3.3. Methods of Data Analysis

In order to analyze the data collected for the study, four different methods were used. These are descriptive statistics, household index development, econometrics model (Ordered Logit regression), and Participatory Rural Appraisal (PRA) technique to get reliable information 38

from focus group discussion. The output of the discussion used as qualitative evidence and included the thesis write up.

3.3.1. Descriptive statistics

Descriptive statistics such as mean, standard deviations, frequencies, percentages, and rankings methods were used. Inferential statistics such as chai-square, t-test, and one way ANOVA used to compare between categories of respondents in terms of empowerment indicators. The F–test has been applied to compare mean values of more than two groups or categories. Furthermore, to measure the empowerment status of sample households, empowerment index that developed from nine indicators obtained from literature review. In developing the empowerment index principles and procedures used by Derege (2008) adapted for this study. In addition case studies were conducted using PRA techniques and analysed with interpretations to triangulate information obtained by other methods.

3.3.2. Econometrics model

This model was used to identify the factors that influence or determine the empowerment status of each category. Econometrics models, which include a "yes" or "no" type dependent variable, are called dichotomous. Such models approximate the mathematical relationships between explanatory variables and the dependent variable that is always assigned qualitative response variables. The four most commonly used approaches to estimate dummy dependent variable regression models are (1) the linear probability model (LPM), (2) the logit, (3) the probit and (4) the tobit model. They are applicable in a wide variety of fields (Gujarati, 2004). These models have specific functional qualities, requirements and problems. Linear probability model (LPM) has some econometric problems like non normality of the 39

disturbances (Ui), heteroscedastic variances of the disturbances, non-fulfillment of 09000

Score 0 1 2 3 4 5 6 7 Score 0 1 2 3 4 5 6 7 8 9 10

2

Knowledge test Minimum Maximum

Score 0 10

7

3

Mobility Low (0-4) Medium (5-9) High (10-13) Control over HH resource Husband only Husband mostly Equal control Wife mostly Wife only

Score 1 3 5 Score 0 1 2 3 4

8

1.2

4

SN

45

5

6 6.1

6.2

9

Indicators Self-esteem Low (0-14) Medium (15 - 27) High (28 - 40)

Bargaining power Bargaining with husband Never Sometimes Most times Always Bargaining with others Never Sometimes Most times Always Minimum Maximum Participation in HH decision Husband only Husband mostly Equal participation Wife mostly Wife only Ownership of own IGA No Yes Social participation Low (0 - 6) Medium (7 - 12) High (13- 18) Empowerment Index Minimum Maximum

Score 1 3 5

Score 0 2 4 6 0 2 4 6 0 6 Score 0 1 2 3 4 Score 0 5 Score 1 3 5 3 61

The independent variables: the independent variables which are expected to have influence on women empowerment are hypothesized to be: 1.

Age (AGE): it is measure in number of years. Age can generate or erode confidence.

With age as a woman get older assumed more or less risk averse to invest productive activities. It was hypothesized that women with young age are more likely to engage in income generating activities that enhance asset ownership and access to information, which ultimately leads to better empowerement (Kishore et al., 2004). 2.

Marital status (MARSTAT): it is a dummy variable which takes value 1 if the woman is

married and 0 otherwise. It is in marriage where adulthood is recognized and the power to take responsibilities over one’s life is well acknowledged. Yet, it is in the same marriage where men take the dominant positions to the subordination of women’s lives (Lakwo, 2007). Therefore, it is hypothesized that married women are more likely to be less empowered than unmarried, widowed or divorced ones. 3. Age difference with husband (AGEDIF): age has its own effect on empowerment that a household where decision is made by both spouse. The more elder the household head it becomes, the more influential in decision making power. When the age difference balance is tilted more to husbands, the decision measures by women in both intrinsic and extrinsic matters get hampered and consequently their level of empowerment is reduced, there is a tendency of power over relations that indicates a negative and controlling power exercised in a win-lose relationship (Kishore et al., 2004; Lakwo, 2007). As a result age difference with the husband is hypothesized to influence women empowerment negatively. Widowed and divorced women are treated as single. 4. Working Age Family Size (FAMSIZE): It refers to the total number of household members in a given family. Family size is means the total number of family members the age groups between 15-64 and including those age groups above and below the indicated figure considered under this variable as dependent but still has own contribution to household labor. The more the family size the household will be endowed with the larger labor contribution to household members and the lesser the work burden on women, which ebables her to engage in 46

productive economic activities (SEEP network, 2000; Birgit, 2001). Therefore, family size is hypothesized to have positive relationship with women empowerment. 5. Dependency ratio (DEPRATIO): this variable refers to the number of children below the age of 15 and old age above 64 years in a given family members counted to the ratio of total family size. The larger the dependency ratio in the household, the lesser the possibility for women to engage in income generating activities being woman spend more time to look after these age groups (Birgit, 2001). In rural community like the research area, caring for children and older age people are left as a responsibility of women. Hence, it is hypothesized to have negative relationship with women empowerment. 6. Level of formal education (FOREDUC): this variable measures the number of school years achieved by women. It is measured in the number of years of formal education. The probability of taking loans increases as the household gets more formal education (Musebe et al, 1993; as cited in Samson, 2002) or could be attending in adult literacy programs. If a woman is relatively better educated, she can have relatively better motivation to do income generating activities. Hence, the probability for productive loan need which helps to accumulate assets and savings will be maximized. Therefore, it is hypothesized to positively influence women empowerment. 7. Distance from the main market (DISMKT): market distance is crucial for purchase and transportation of agricultural inputs and other consumable goods from urban to rural areas at reasonable time and costs. Similarly, farmers can supply agricultural outputs to market a lesser cost and fresh condition if market infrastructure found at nearby distances. On the other hand if the market center closer women can have better opportunity to visit market places more frequently. It is measured in kilometers the closer they are to the main nearest market, the more likely to receive valuable information (Abadi, 1999; Roy, 1999; as cited in Ebrahim, 2006). Hence, the better will be the probability to involve in income generating activities which leads to better bargaining power, better contribution for household expenditure and/or better ownership of assets by women. Thus, distance from main market center has been hypothesized to have negative influence on women empowerment. 47

8. Years of experience in income generation (YEXPIGA): income generating activities encompass a wide range of areas, such as small business promotion, cooperatives, job creation schemes, sewing circles and credit and saving groups (Albee, 1994). Women in the study area have involved in different income generation activities such as petty trade, small ruminant fattening, poultry, etc. The more the woman’s experience in running income generating activities, the better will be her ownership of assets and/or contribution for household expenditures. It is measured in terms of year. In similar study conducted (Derege, 2008) has come up with significant and positive relationship between years of experience in income generation and women empowerment. Hence, it is hypothesized to positively influence women empowerment. 9. Years of membership in Village Saving and Loan Association (YMEMBER): it is a continuous variable measured in the number of years of membership of the woman in the association by the time of interview. Rural credit and saving institutions are found to have empowering effect on women empowerment (Schuler et al., 1997; Rahman and Da Vanzo, 1997, Derege, 2008). Therefore, it is hypothesized that level of empowerment increases with years of membership in village saving and loan association. 10. Extension Participation (EXTPART): this refers to any extension services provided by government and non-government organizations in the area. Frequency of participation in different extension events are used to measure extension participation. In the study woreda extension services have been provided to farmers by office of agriculture, office of health, Oromiya MFI, and CARE Ethiopia East Hararghe Field office were the major sources of information in the study area. Access to information is one of the basic elements of empowerment (World Bank, 2002). Hence, extension participation is hypothesized to positively influence women empowerment. 11. Contact with Extension agent (EXTCONT): not only access to extension service, but also the frequency of contact determines the rate of behavioral change in farmers’ attitude. The more frequent contact opens room for more and up to date extension services to be transferred to women. The interaction provides more information for household and facilitates 48

women informed decision on their livelihoods. As a result women who have more contact with development agent assumed more informed and empowered compared to those who have less contact (ADB, 1997). Thus, frequency of contact with development agent is hypothesized to have positive influence on women empowerment. 12. Cumulative amount of loan received (CAMLOAN): is the total amount of loan received in Birr by the respondent from different lending institutions in one year period by the time of interview. Large cumulative amount of loan received shows the capacity and selfconfidence of the borrower to expand business for better income. Hence, cumulative amount of loan access for women hypothesized to have positive influence on women empowerment. 13. Livestock ownership (LIVOWN): in an agrarian economy, the one like in the research area livestock ownership are the major asset for household economy. Livestock serves as a means of income, traction power and nutrition. Usually small ruminants, cows and chickens are controlled by women. Physical and financial asset ownership and empowerment are highly correlated. As a result households and more specifically women who have relatively larger livestock holdings (hence income from it) are better off than those who have less or none. This improves women’s self-confidence and their ownership of property and assets and/or their economic contribution for the household (MoFED, 2005; Hillina, 2005). It is measured in terms of TLU. Therefore, it is hypothesized to have positive influence on women empowerment. 14. Distance from district town (DISTOWN): it is measured in kilometres and use as a proxy to measure degree of remoteness. As one goes far away from district town, the relative distribution of social services decreases in remote rural villages. Hence, the lesser is the person’s access to social services and information. Therefore, it is hypothesized distance from district town will negatively influence women empowerment.

49

3.5. Definition and Codes of Variables The dependent variable women empowerment is classified to categories of very low, low, medium, high and very high dividing the empowerment score range into five equal parts that makes it ordinal nature. The independent variables included in the model are a combination of dichotomous, continuous and discrete variables. The variables code and expected sign of influence summarized here below.

Table 3. Definition and codes of variables in the study Variable code

Variable Type

Variable Definition

Expected sign (+/-)

Age

Continuous

Age of respondent

_

MARSTAT

Dummy

Marital status of the respondent (1married, 0

_

otherwise) AGEDIF

Continuous

Age difference of respondent with her

_

husband FAMSIZE

Descrete

Household members living with women

+

DEPRATIO

Descrete

The ratio of dependents age less than < 15

_

and >64 years old FOREDUC

Continuous

The level of formal education

+

DISMKT

Continuous

Distance from market center in km

_

YEXPIGA

Continuous

Years of income generation experience

+

YMEMBER

Continuous

Years of membership in VSLA

+

EXTPART

Continuous

It measured in frequency of extension

+

participation on training and others EXTCONT

Dummy

Women’s contact with extension agents, 1 if

+

there is contact and 0 otherwise CAMLOAN

Continuous

Total amount of loan received in Birr

+

LIVOWN

Continuous

Livestock ownership in TLU

+

DISTOWN

Continuous

Distance from district town

_

50

4. RESULTS AND DISCUSSIONS      

This chapter deals on the analytical description of the research study conducted on women empowerment having different sections and sub sections. The first section discusses on results of women empowerment based on the empowerment index summarized and included in the analysis from separate excel sheets. The empowerment status was calculated from nine empowerment indicators that have relevance to microfinance activities and adapted to the study context. The next sections deal with the hypothesized explanatory variables and its effect on the explained variable i.e. women empowerment, summarize results of descriptive statistics, outputs of the logistic regression, and the last section discuss on saving and loan use patterns of respondents in the study woreda.

4.1. Empowerment Status of the Sampled Respondents  

The empowerment status of sample respondents was assessed using nine empowerment indicators, such as women’s ownership of asset (cash plus physical asset), ownership of own income generating activities, control over resources, participation in household decisionmaking process, self-esteem, social or community participation, mobility, knowledge of project activities, and bargaining power. These indicators were summated to in separate excel sheet and the index use to analyse the empowerment status of the sample respondents. The assumption behind the indicators was discussed in the preceding section 3.7. The individual scores and values of the indicators summarized in empowerment index in table 2. The sample respondents’ empowerment status analysed with individual scores against the nine indicators and the relative scores of each member levelled into one of the five categories, these are, very low, low, medium, high, and very high. The five categories are developed through classifying the index that ranges the minimum 3 and maximum 61 into five equal parts. However, the actual index ranges minimum of 8 and maximum of 58 points. Based on that the five empowerment categories levelled from (3-14) very low, (15-25) low, (26-37) medium, 51

(38-48) high, and (49-61) scores were under very high category. Thus, the total scores of each respondent were analysed in line with the categories fall and the level of each empowerment group measured against the five levels of likert scale, 1 very low range (3-14), 2 low ranges (15-25), 3 medium (26-37), 4 high ranges (38-48), and 5 very high ranges between (49-61) empowerment categories.

Then, the categories were tested for significance by one way

ANOVA and the result summarized in table 3 below. The result shows from the total 180 respondents, 13 (7.2%) fall under very low empowerment category, 51 (28.3%) samples low, 66 (36.7%) medium empowered category, and the rest 39 (21.7%) respondents scored high and 11(6.1%) very high empowerment categories respectively. The five empowerment categories were tested by one way ANOVA to see the existence of mean difference among the five empowerment categories. The result in table 4 shows the existence of significance mean difference among the five empowerment categories at P