Impact of microfinance on youth income generation in Horo Guduru Welega, Ethiopia

In the context of achieving Sustainable Development Goals (SDGs) 1 and 8, this study evaluates the impact of microfinance on youth income generation in the Horo Guduru Wollega Zone, Ethiopia. It specifically identifies factors influencing youth participation in microcredit, assesses its effect on income, and explores key challenges and opportunities within the microfinance institution. A cross-sectional survey design and multistage sampling technique were used to select 378 respondents (249 participants and 129 non-participants) from a randomly chosen town. Data were collected from both primary and secondary sources and analyzed using descriptive statistics, logit regression, and propensity score matching (PSM). The logit model results showed that education, adequate loan size positively and significantly influenced participation in microcredit. In contrast, age, perception of interest rates, loan disbursement time, and distance to microfinance institutions negatively affected participation decisions. The PSM results indicated that microcredit participation has a positive and significant impact on youth income, increasing annual income by about 10,243.90 ETB compared to non-participants. Major challenges identified included lack of infrastructure, collateral requirements, limited awareness, insufficient funds, and strict credit procedures. Key opportunities included, proximity to microfinance institutions, and the presence of financial service providers. The study concludes that microfinance is a vital tool for economic empowerment and recommends that the Ethiopian government and NGOs streamline credit access to accelerate the realization of the 2030 Agenda for Sustainable Development at the local level.