Social Capital and Poverty Reduction in Ethiopia: Evidence from the Amhara Region

Abstract

This paper broadens the scope of research on social capital theory by offering new perspectives and empirical evidence on reducing objective poverty. The aim of this study is to investigate the influence of social capital on poverty reduction among members of financial cooperatives in both urban and rural areas of the Amhara National Regional State, Ethiopia. Kothari's formula was employed, followed by multi-stage stratified, proportional, and random sampling. Primary data was collected from 348 sample members through a structured questionnaire, focus group discussions, and personal interviews. Additionally, data was analyzed using multiple linear regression and logistic regression models. The study reveals important insights into the relationship between social capital and poverty reduction among members. Structural and relational social capital, family labor, physical capital, and access to credit have a positive and significant impact on poverty reduction. On the other hand, the lack of cognitive social capital, which refers to the lack of awareness regarding the common mission, goals, and shared values of financial cooperatives, has a negative and significant impact on poverty reduction. Furthermore, family size, marital status, and individual health conditions also negatively and significantly affect poverty reduction. The study emphasizes the significance of social capital in influencing poverty reduction among members in the study area. Policymakers can design targeted interventions to effectively combat poverty by recognizing the impact of different dimensions of social capital, as well as family labor and physical capital. Strengthening social capital within financial cooperatives and promoting collaboration with financial institutions are essential steps towards achieving the Sustainable Development Goal of poverty alleviation in the region.