Abstract:
Ethiopia’s agricultural sector accounts to 40 percent of national Gross Domestic Product.
This shows that the sector is important in improving the livelihoods of the bulk of the population.
Despite its importance, the agricultural sector in Ethiopia is characterized by low productivity. To
improve this and overall economic growth, the Ethiopian government has focused on promotion
of organic fertilizer use. However, adoption of organic fertilizer remains low in most parts of
Ethiopia including Shashemene district. This study therefore aimed at identifying the major
constraints of organic fertilizer adoption and its income effect with specific objectives being
determining transaction costs associated with adoption of organic fertilizer, factors influencing
adoption and use intensity and impact of organic fertilizer use on households’ farm income. The
study used primary data which was collected from 368 smallholder farmers. The analytical
framework incorporated descriptive statistics, double hurdle model and propensity score matching.
The results showed that the average transaction costs through bargaining, searching for
information and transportation were 68.23 ETB, 53.33 ETB and 124.53 ETB respectively. Policing
and enforcement costs were non-existent among the farmers. The household size, livestock
number, extension contacts, access to information media and membership to farmer groups
significantly influenced the decision to adopt organic fertilizer. The farm income, size of the
cultivated plot, membership to farmer groups and application frequency of organic fertilizer
significantly influenced the intensity of organic fertilizer use. Propensity score matching revealed
that the adoption of organic fertilizer increased farmers per hectare farm income by between 2661
ETB and 2959 ETB. Thus, farmers should be encouraged to adopt organic fertilizer. This could be
possible if the government and other stakeholders gave more attention to provision of better
extension services and better access to information related to organic fertilizer adoption as well as
making availability of this fertilizer to farmers easier
