Impact of Social Capital on Poverty Reduction in Ethiopia: Evidence from the Amhara National Regional Staten
Article Sidebar
-
Member Households, Poverty, Social Capital, Financial Cooperatives, Economic Development, Sustainable Development Goals
Abstract
This study aims to investigate the influence of social capital on poverty reduction among members of financial cooperatives in the urban and rural areas of the Amhara National Regional State, Ethiopia. Adopted explanatory and used mixed research methods using the cross-sectional study from 348 stratified and randomly selected financial cooperative members. Primary data was collected through a structured questionnaire, focus group discussions, and personal interviews. Furthermore, the data was analysed using logistic regression and multiple linear regression models. Three types of social capital dimensions: cognitive, relational, and structural social capital is operationalized and measured in terms of members' understanding of shared mission and goal, cooperation, and trust. The regression result shows that structural social capital and relational social capital are associated with improved poverty reduction, whereas a lack of cognitive social capital is associated with a decline in the reduction in household poverty of financial cooperative members. Surprisingly, the finding indicated that dimensions of social capital are more effective in affecting monetary poverty than other variables in the Amhara region. The study underscores the importance of social capital in influencing poverty reduction among members of the study area. Recognizing the impact of different dimensions of social capital, policymakers can design targeted interventions to combat poverty effectively. Strengthening social capital within financial cooperatives and promoting collaboration with financial institutions are essential steps towards achieving the Sustainable Development Goal of alleviating poverty in the region.
Full text article
References
Adekola, G., & Dokubo, C. (2017). Cooperative societies and poverty reduction among members for community development in Rivers State, Nigeria. European Scientific Journal, 13(8), 250. https://doi.org/10.19044/esj.2017.v13n8p250
Adepoju, A. A., & Oni, O. A. (2012). Investigating endogeneity effects of social capital on household welfare in Nigeria: A control function approach. Quarterly Journal of International Agriculture, 51(1), 73-96.
Adi Syahid, M. A., Faathirah, J., & Tuan, M. Z. (2021). Social capital in poverty reduction: A systematic literature review. Turkish Journal of Computer and Mathematics Education, 4, 665. https://doi.org/10.17762/turcomat.v12i2.920
Afrobarometer. (2021). With high prevalence of lived poverty, Ethiopians rate government's economic performance as poor. Dispatch No. 426 | 11 February.
Ahmad, I. (2024). The Role of Strategic Financial Management in Enhancing Corporate Value and Competitiveness in the Digital Economy. Innovation Economics Frontiers, 27(1), 1-08. https://doi.org/10.36923/economa.v27i1.116
Ahmad, N., & Sadaqat, M. (2016). Social capital household welfare and poverty: Evidence from Pakistan. The Pakistan Development Review, 55(4), 467-482. https://doi.org/10.30541/v55i4I-IIpp.467-482
Ajakaiye, O., & Mwabu, G. (2007). The demand for reproductive health services: An application of control function approach. Paper presented at the 12th Annual Conference of the African Econometric Society.
Akaike, H. (1973). Information theory and the maximum likelihood principle. In B. N. Petrov & F. Csaki (Eds.), Proceedings of the 2nd International Symposium on Information Theory (pp. 267-281). Akademiai Kiado, Budapest.
Alemu, M., & Tola, S. (2020). Social capital and its implication for economic wellbeing and sustainable development: Household-level analysis to Jimma zone, south-west Ethiopia. Journal of Analytical Techniques and Research, 2(2020): 18-26. https://doi.org/10.26502/jatri.010
Arega B., & Wubliker C. (2015). Iddirs as community-based social capital in the Amhara Region of Ethiopia: Case study in Gende Woin Town of East Gojjam. The Ethiopian Journal of Social Sciences, 1(1), 3–23. Google Scholar
Austrian Development Agency. (2019). Ethiopia country strategy 2019-2025. Minoritenplatz 8, 1014 Vienna, Austria.
Awunyo-Vitor, D., Abankwah, V., & Kwansah, J. K. K. (2012). Women Participation in Microcredit and Its Impact on Income: A Study of Small-Scale Businesses in the Central Region of Ghana. Journal of Experimental Agriculture International, 2(3), 502–515. https://doi.org/10.9734/AJEA/2012/1127
Balogun, S. A., Yusuf, B. T., Omonona, V. O., & Okoruwa, V. O. (2011). Social capital and microcredit effects on poverty among rural households in the southwest states, Nigeria. Journal of Agricultural and Biological Science, 6(3), 5-10. https://doi.org/10.5539/jas.v3n1p128
Bayraktar, M. (2024). Social capital and income inequality: Findings from selected high-income countries. https://doi.org/10.21203/rs.3.rs-3824788/v1
Bertelsmann Stiftung (2020). BTI 2020 Country Report — Ethiopia. Gütersloh: Bertelsmann Stiftung. https://www.bti-project.org.
Christiaan Grootaert and Thierry Van Bastelar. (2002). Understanding and measuring social capital. https://doi.org/10.1596/0-8213-5068-4
Christoforou, A. (2017). Social capital and local development in European rural areas: Theory and empirics. In A. Christoforou & J. Davis (Eds.), Social capital and local development: Theory and empirics (pp. 27-47). Cham, Switzerland: Springer International Publishing AG. https://doi.org/10.1007/978-3-319-54277-5_3
Collier, P. (2002). Social capital and poverty: A microeconomic perspective. The Role of Social Capital in Development, 19-41. https://doi.org/10.1017/cbo9780511492600.003
Conley, T., & Udry, C. (2010). Learning about a new technology: Pineapple in Ghana. American Economic Review, 100(1), 35-69. https://doi.org/10.1257/aer.100.1.35
Coudouel, A., Hentschel, J. S., & Wodon, Q. T. (2004). Poverty measurement and analysis. Core Techniques and Cross-Cutting Issues, 1, 27-74. Washington DC: World Bank.
Daniel, A. M., Gerber, N., & Matz, J. A. (2016). Social networks, agricultural innovations, and farm productivity in Ethiopia. African Development Bank Group, Working Paper, 235. African Development Bank, Abidjan.
Deaton, A., & Zaidi, S. (2002). Guidelines for constructing consumption aggregates for welfare analysis. Living Standards Measurement Study Working Paper, 135, 104. xi, Washington, D.C.: The World Bank.
Di Falco, S., & Bulte, E. (2013). The impact of kinship networks on the adoption of risk-mitigating strategies in Ethiopia. World Development, 43, 100-110. https://doi.org/10.1016/j.worlddev.2012.10.011
Dodd, V. (2012). Social capital and subjective well-being: The case of rural Ethiopia. (Master's thesis, Clemson University).
Eleni, G. Z. (2001). Market institutions, transaction costs, and social capital in the Ethiopian grain market. Research Report (124), International Food Policy Research Institute, Washington D.C.
Enideg, W. N. (2013). Social capital and its relationship with economic and social well-being of households: Rural and urban experiences in North Gondar, Ethiopia. (PhD dissertation, Addis Ababa University).
Eyasu, A. M., & Yildiz, F. (2020). Determinants of poverty in rural households: Evidence from North-Western Ethiopia. Cogent Food & Agriculture, 6(1), 1-2-. https://doi.org/10.1080/23311932.2020.1823652
Fafchamps, M., & Gubert, F. (2007). The formation of risk-sharing networks. Journal of Development Economics, 83(2), 326-350. https://doi.org/10.1016/j.jdeveco.2006.05.005
Fakayode, S. B., & Rahji, M. A. Y. (2009). A multinomial logit analysis of agricultural credit rationing by commercial banks in Nigeria. International Research Journal of Finance and Economics, 24, 90-100.
FAO. (2020). The state of food security and nutrition in the world 2020: Transforming food systems for affordable healthy diets. Rome, FAO.
FDRE. (2018). Poverty and economic growth in Ethiopia 1995/96-2015/16. Planning and Development Commission.
Foundation, J. R., & Hills, J. (2013). Monitoring Poverty And Social Exclusion 2013. J. Rowntree Foundation.
Govender, P., Kambabaran, N., Patchchett, N., Ruddle, A., Torr, G., & Van Zyl, N. (2007). Poverty and inequality in South Africa and the world. South African Actuarial Journal, 7, 117-160. https://doi.org/10.4314/saaj.v7i1.24511
Greenbaum, S., Hathaway, W., Rodriguez, C., Spalding, A., & Ward, B. (2008). Deconcentration and social capital: Contradictions of a poverty alleviation policy. Journal of Poverty, 12(2), 201-228. https://doi.org/10.1080/10875540801973609
Gujarati, D. N. (2003). Basic econometrics (4th ed.). New York, NY: The McGraw-Hill Companies.
Gujarati, D. N. (2006). Essentials of econometrics (3rd ed.). New York, NY: McGraw-Hill.
Hassan, R., & Birungi, P. (2011). Social capital and poverty in Uganda. Journal of Development Southern Africa, 28(1), 19-37. https://doi.org/10.1080/0376835X.2011.545168
Imandoust, S. B. (2011). Relationship between education and social capital. International Journal of Humanities and Social Science, 1(12), 52-57.
Jha, J., & Kelley, E. (2023). Returns to relationships: Social capital and household welfare in India. Social Sciences, 12(3), 184. https://doi.org/10.3390/socsci12030184
Karimi, A. T. (2015). The role of social capital in poverty reduction: A case study of saving groups in the Parwan Province of Afghanistan. (Master's thesis, Ritsumeikan Asia Pacific University, Japan).
Kondo, T., Orbeta, A., Dingcong, C., & Infantado, C. (2007). Impact of microfinance on rural households in the Philippines: A case study from the special evaluation study on the effects of microfinance operations on poor households and the status of women. Asian Development Bank, Manila.
Kothari, C. (2004). Research methodology: Methods and techniques (2nd ed.). New Delhi: New Age International (P) Ltd., Publishers.
Lee, D. S. (2009). Training, wages, and sample selection: Estimating sharp bounds on treatment effects. Review of Economic Studies, 76, 1071-1102. https://doi.org/10.1111/j.1467-937X.2009.00536.x
Legatum Institute. (2020). Legatum prosperity index sources and indicators used and changes made since the 2019 index: A tool for transformation 2020.
Maddala, G. S. (2001). Introduction to econometrics (3rd ed.). New York, NY: John Wiley & Sons.
Martey, E., Etwire, P. M., Wiredu, A. N., & Dogbe, W. (2014). Factors influencing willingness to participate in multi-stakeholder platform by smallholder farmers in Northern Ghana: Implication for research and development. Agricultural and Food Economics, 2(11), 1-15.
Meyer, B. D., & Sullivan, J. X. (2003). Measuring the well-being of the poor using income and consumption. Journal of Humanities Resource, 38, S1180-220. https://doi.org/10.2307/3558985
Ministry of Finance and Economic Development (MoFEC). (2019). 2012 FY federal budget summary volume 1, Addis Ababa, Ethiopia.
Mintewab Bezabih & Abe Damte Beyene & Zenebe Gebreegziabher & Livousew Borga, (2013). Social Capital, climate change and soil conservation investment: panel data evidence from the Highlands of Ethiopia, GRI Working Papers 115, Grantham Research Institute on Climate Change and the Environment.
Moratti, M., & Natali, L. (2012). Measuring household welfare: Short versus long consumption modules. Innocenti Working Papers No. 2012-04. UNICEF Office of Research.
Nega, F., Mathijs, E., Deckers, J., & Tollens, E. (2009). Gender, social capital, and empowerment in northern Ethiopia. Addis Ababa, Ethiopia.
Ogunleye, A. S., & Adeyemo, R. (2020). Social capital networks, microcredit and poverty status of rural households in Nigeria. Journal of Agribusiness and Rural Development, 4(58), 369-378. https://doi.org/10.17306/J.JARD.2020.01346
Oke, J. T. O., Adeyemo, R., & Agbonlahor, M. U. (2007). An empirical analysis of microcredit repayment in Southwestern, Nigeria. Journal of Humanities and Social Science, 2(1), 63-74. https://doi.org/10.1300/10911350802081592
Okunmadewa, F. Y., Yusuf, S. A., & Omonona, B. T. (2007). Effects of social capital on rural poverty in Nigeria. Journal of Social Science, 4(3), 331-339.
Olaleye, B. R., Efuntade, A. O., Anifowose, O. N., & Efuntade, O. O. (2020). Social capital and its influence on poverty reduction among rural households in Ogun State, Nigeria. AIUB Journal of Business and Economics, 17(1), 01-26.
Onyernama, J. C., Adekunle, B. J., Egwu, C., & Ada, C. O. (2024). Poverty alleviation programs and economic development evidence from Nigeria. International Journal of Business and Applied Economics, 3(2), 323-324. https://doi.org/10.55927/ijbae.v3i2.8621
Osborn, D., Cutter, A., & Ullah, F. (2015). Universal sustainable development goals: Understanding the transformational challenge for developed countries. Report of a study by Stakeholder Forum.
Osei, C. D., & Zhuang, J. (2020). Rural poverty alleviation strategies and social capital link: The mediation role of women entrepreneurship and social innovation. SAGE Open, 10(2). https://doi.org/10.1177/2158244020925504
Pham, A. T. Q., & Mukhopadhaya, P. (2022). Multidimensional poverty and the role of social capital in poverty alleviation among ethnic groups in rural Vietnam: A multilevel analysis. Social Indicators Research, 159(1), 281-317. https://doi.org/10.1007/s11205-021-02747-y
Putnam, R. D. (1994). Tuning in, tuning out: The strange disappearance of social capital in America. PS Online: American Political Science Association's Journal of the Profession. https://doi.org/10.2307/420517
Putnam, R. D. (1995). Bowling alone: America's declining social capital. Journal of Democracy, 6(1), 65-78. https://doi.org/10.1353/jod.1995.0002
Schwarz, G. (1978). Estimating the dimension of a model. The Annals of Statistics, 6 (2) 461 – 464. https://doi.org/10.1214/aos/1176344136
Shiaki, T. K., Almakura, F. A., Gambo, N., & Abubakar, H. L. (2024). Impact of social capital on poverty reduction in Benue State Nigeria. International Journal of Small Business and Entrepreneurship Research, 12(1), 60-82. https://doi.org/10.37745/ijsber.2013/vol12n16082
Taga, A. A. (2013). Social capital and poverty alleviation: Some qualitative evidence from Lahore District. International Journal of Basic and Applied Science, 1(3), 681-693.
Tenzin G, Otsuka K, Natsuda K. (2013). Impact of social capital on poverty: A case of rural households in Eastern Bhutan. Ritsumeikan Center for Asia Pacific Studies (RCAPS) Working Paper Series RWP-13004.
Umejiaku, R. I. (2020). Access to Credit on the Growth of Women Entrepreneurs in Jos, Plateau State: The Influence of Financial Support Services. Innovation Journal of Social Sciences and Economic Review, 2(1), 24-34. https://doi.org/10.36923/ijsser.v2i1.51
UNDP. (2020). Human development report 2020: The next frontier: Human development and the anthropocene. Briefing note for countries on the 2020 Human Development Report, Ethiopia.
United Nations High Commissioner for Refugees (UNHCR). (2022). Annual Results Report 2023 Ethiopia.
Verbeek, M. (2004). A guide to modern econometrics (2nd ed.). New York, NY: John Wiley & Sons.
Wassie, N. Y., & Abebe, D. T. (2024). Unveiling the Dynamics of Women's Self-Help Groups: Exploring Socio-Economic and Socio-Psychological Factors in Debre Birhan, Ethiopia. Innovation Journal of Social Sciences and Economic Review, 6(1), 01-10. https://doi.org/10.36923/ijsser.v6i1.244
Wetterberg, A. (2005). Crisis, social ties, and household welfare: Testing social capital theory with evidence from Indonesia. World Bank Office, Jakarta.
Wooldridge J. M. (2015). Introductory econometrics. A modern approach. Boston, MA: Cengage Learning. Google Scholar
World Bank. (2012). Delivering better health services to Pakistan's poor (Report No. 68258). Washington, DC: World Bank.
World Bank. (2014). Main annual report (English). Washington, DC: World Bank Group. http://documents.worldbank.org/curated/en/111781468170952958/Main-report
Yunus, S., Zainal, S., Jalil, F., & Sari, C. M. A. (2020). Correlation of social capital and poverty farmers in Acheh. Human & Social Sciences Reviews, 8(1), 20-26. https://doi.org/10.18510/hssr.2020.813
Zhang, Y., Zhou, X., & Lei, W. (2017). Social capital and its contingent value in poverty reduction: Evidence from Western China. World Development, 93, 350-361. https://doi.org/10.1016/j.worlddev.2016.12.034
Authors
Copyright (c) 2024 Fentahun Admassu Yayeh, Wondaferahu Mulugeta Demissie
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright / Open Access Policy: This journal provides immediate free open access and is distributed under the terms and conditions of the Creative Commons Attribution License (CC BY). This is an open-access journal, which means readers can access it freely. Readers may read, download, copy, distribute, print, search, or link to the full texts of the articles for any lawful purpose without seeking prior permission from the publisher or author. This is consistent with the Budapest Open Access Initiative's (BOAI) definition of open access.
Article Details
How to Cite
Most read articles by the same author(s)
- Fentahun Admassu Yayeh, From Peg to Float: Economic and Political Implications of the Ethiopian Birr Flotation , Innovation Economics Frontiers: Vol. 28 No. 1 (2025)
- Fentahun Admassu Yayeh, Wondaferahu Mulugeta Demissie, Social Capital and Saving Behavior in Ethiopia: Evidence from the Amhara National Regional State , Innovation Economics Frontiers: Vol. 28 No. 1 (2025)