Impact of Social Capital on Poverty Reduction in Ethiopia: Evidence from the Amhara National Regional Staten

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.