ABSTRACT Agricultural credit is a practice of receiving loan with interest rates which is used to increase agricultural production. Agricultural credit now a day’s becomes a serious agenda in economic activities across the globe and it is one of the contributing factors for economic development; especially in the third world countries. It is a mechanism through which the interaction between supply and demand can be maintained in the society. This study is aimed to assess the role of Agricultural Credit in improving the livelihoods of Farming Households in Case of Oromia Credit and Saving Share Company by taking Gomma Woreda.  as a case which is found in Oromia region Jimma Zone. The investigator used descriptive type of research design and mixed method is employed as the research approach. The data were collected from both primary and secondary sources. The primary  data  for  this  study  was  collected  from  177  respondents  which  were  selected  by  applying  random 

 x  sampling  techniques  using survey questionnaires and  in  depth  interview was  conducted  with  6  individuals identifying them through purposing sampling technique. In addition 12 participants were taken part in FGD. The study applied both qualitative and quantitative methods of data analysis to interpret the result of the study. The study’s finding shows that; Agricultural credit is widely received by many people in study area. Farmers are highly engaged in receiving agricultural credit to improve their livelihoods. Furthermore the study shows lack of access to this credit and inability to fulfill requirements of MFI are major problems. In addition this study indicated that some individuals use the credit for other purposes than for agricultural production. This agricultural  credit  has  positive  impact  on  social  and  economic  life  of  the  community  and  result  in accumulation  of  assets.  Based  on  the  findings  of  the  study,  the  role  of  agricultural  credit  in  improving livelihoods of farming households is identified. As recommendation different government institution, NGO and MFI should focus on creating the awareness of the society on the use of agricultural credit. In general this study shows that the role of agricultural credit significantly affects the livelihoods of farming households.   Key Words: - Agricultural credit, Livelihoods, Microfinance, Poverty.

       Table of Contents 

Declaration……………………………………….......................................……...………………….iii 

Acknowledgment…………………………………................................………….……..iv 

Abbreviation……………………………...................................…………………………v 

Table Of Contents……………………,.……….........…………………………………..………vi 

Abstract……………………………...........................................…………….………………………X 

Contents                                                                                                             Pages

 CHAPTER ONE: INTRODUCTION ....................................................................................................... v

 1.1 Background of the Study ..................................................................................................................... v

 1.2, STATEMENT OF THE PROBLEM ................................................................................................. v 

1.3. Research questions ............................................................................................................................. v 

1.4, Objectives of the Study ...................................................................................................................... v 

1.4.1, General Objective of the study .................................................................................................... v

 1.4.2, Specific Objectives of the study .................................................................................................. v 

1.5 Significance of the Study .................................................................................................................... v 

1.6, Scope of the Study. ............................................................................................................................ v 

1.7, Organization of the Research ............................................................................................................. v 

1.8, Operational Definitions  ..................................................................................................................... v 

CHAPTER TWO: REVIEW OF R ELATED LITERATURES ............................................................ 8 

2.1 Theoretical Concepts of Microfinance ................................................................................................ 8 

2.2 Empirical Concepts of MFI and Agricultural credit services ............................................................. 9 

2.2.1 MFIs for Human Development .................................................................................................... 9 

2.2.2   Credit and MFI ......................................................................................................................... 10 

2.2.3 Micro-financial institutes Products and Services ....................................................................... 10 

2.2.4. Microfinance and its role in economic development ................................................................ 11 

2.2.5   Role of agricultural credit services .......................................................................................... 12 

2.2.6   Microfinance Challenges ......................................................................................................... 13 

 vi  2.2.6.1 Challenges of poor households in rural people in Micro finance institutions ......................... 14 

2.2.6.2. Interest Rate: .......................................................................................................................... 14 

2.2.6.3. Diverting loan to urgent problems ......................................................................................... 15 

2.2.7 The Development of MFI in Ethiopia ........................................................................................ 15 

2.2.7.1 Credit policy in Ethiopia ......................................................................................................... 16 

2.2.7.2 Challenges faced by micro financing ....................................................................................... vi 

2.3 Conceptual Framework ...................................................................................................................... vi 

CHAPTER THREE:  RESEARCH METHODS AND METHOLOGY .............................................. 19 

3.1 Description of the Study Area ........................................................................................................... 19 

3.2. Research Design and Approach ....................................................................................................... 20 

3.2.1. Research Design ........................................................................................................................ 20

 3.2.2, DATA TYPE AND SOURCE .................................................................................................. 21

 3.2.3. Sampling techniques and procedures ........................................................................................ 22 

3.2.4. Methods of data collection ........................................................................................................ 23 

3.2.4.1. Survey Questionnaire ............................................................................................................. 23 

3.2.4.2 Key Informants Interviews (KIIs):-......................................................................................... 24 

3.2.4.3   Focus Group Discussion (FGD) ............................................................................................ 24 

3.2.5. Data Analysis Method ............................................................................................................... 25 

CHAPTER FOUR: ................................................................................................................................... 26 

4. DATA PRESENTATION, ANALYSIS AND INTERPRETATIONS ............................................. 26 

4.1. Introduction ...................................................................................................................................... 26 

4.2 Demographic Characteristic of Respondents .................................................................................... 27 

I, Respondents by Sex and Age........................................................................................................... 27 

II. Respondents Status and Family Size .............................................................................................. 31 

4.3. Trend and utilization of agricultural credit ...................................................................................... 32 

4.3.2 Utilizations of Agricultural Credit Service ................................................................................ 32 

4.4 The Role of Agricultural Credit on economic status of farming house holds ................................... 36 

4.4.1 Sources of income ...................................................................................................................... 36 

4.5.1 Asset Accumulation of Farmer Clients ...................................................................................... 44 

4.6   Saving of Clients ............................................................................................................................. 46 

4.6.2 The Role of Agricultural Credit on Decision Making Power. ................................................... 48 

4.7 Decision Making Power of Client ..................................................................................................... 48 

4.8. Challenges related to the use of Agricultural Credit ........................................................................ 50 

 vii  CHAPTER FIVE: Summary, Conclusion and Recommendations ...................................................... 54 

5.1. Summary of the Findings ................................................................................................................. 54 

5.2. Conclusion ....................................................................................................................................... 54 

5.3 Recommendation .............................................................................................................................. 56 

REFERENCES .......................................................................................................................................... 58 

Appendixes ................................................................................................................................................. 62 

Appendix 1 .............................................................................................................................................. 62 

Questionnaire for Farmers ...................................................................................................................... 62

 Appendix 2 .............................................................................................................................................. 86 

Key Informant Interview for Developmental agent and Kebele chair person ........................................ 86 

Appendix 3 .............................................................................................................................................. 86