Financing rural households and its impact: Evidence from randomized field experiment data

Tigist Mekonnen Melesse


We evaluate the short-term impact of financial support to smallholder farmers and training program to married women in two regions of Ethiopia. Using household-level panel data from the World Bank collected in 2010-2012, the combined Difference-In-Difference (DID) and matching methods are applied. The three main findings emerge from the analysis shows that first; the program seems to improve rural households’ annual income from farm and non-farm economic activities (26 percent). Second, financial incentive positively affects smallholders’ innovative farm practices, adoption of modern technologies and new marketing approach. Third, only training to resource-poor rural women is not enough to their income earning activities. Farm households engage themselves in nonfarm economic activities measured in working days positively affect households’ income. However, the whole household member participation in agricultural activities has a negative effect on income, suggesting that the surplus labor participation on a small land holding household resulting in diminishing marginal return on income.

JEL Classification: C93, O12, Q14

Keywords: Rural capacity building, innovation, technologies, randomized control trials, Ethiopia