The Role of Non-Farm Income during Variable Rainfall: The Case of Rural Farm Households in Ijere Woreda, Oromia Region, Ethiopia

Abstract

A growing body of empirical evidence shows that rainfall is highly variable throughout Ethiopia. This situation coupled with poor irrigation development, small agricultural land holding, and population pressure forced rural households to diversify their income sources into off-farm and non-farm activities. However, the contribution of these activities to total income of households and their role on reducing vulnerability of farmers to rainfall variability has not been studied. This study, using cross sectional data from Ijere woreda, Oromia regions and employing both descriptive and econometric analysis, attempted to explain the various off-farm & nonfarm activities, measured their contribution to total household income, and analyzed the role of such incomes on households' vulnerability to rainfall variability. As such, the study found that rural households who participated in off-farm and non-farm activities were able to earn 9.7% and 7% of their total income, respectively. Results also indicated that off-farm and nonfarm activities helped participant households to smooth their income over years enabling them to be less exposed to income fluctuation and rainfall variability than nonparticipants. Thus, income diversification is found a significant livelihood strategy to hedge against weather risks – rainfall variability. Yet, Off-farm activities are found to be more of labor intensive and used for day-to-day consumption. In addition, although there is a potential for developing the rural nonfarm economy, the current share of nonfarm income was very limited which was due to the limited/low profit margins and multiplier effects of the nonfarm activities.