Commercial transformation of subsistence farming is crucial pathway towards economic growth more specifically smallholders’ commercialization. The major objective of this study was identify institutional challenges in smallholders’ commercialization in Mieso and Gumbi-Bordode districts of West Hararghe Zone, Oromia National Regional State, Ethiopia. Principal component analysis of multivariate data reduction technique was used to achieve these objectives based on data collected from. Results of the study indicated that land tenure insecurity, low status and backward farming system, inadequate access to credit and saving, price changes in relation to supply and demand, insufficient market facilities for livestock farm, inadequate investment in irrigation, insurance and transport network challenge that increased failure of households to fully protect from severe consequences of institutional challenges in turn undermine smallholder’s commercialization. This study found tenure insecurity, insufficient market facilities, insurance and transport network and access to credit and saving as an important challenges that leads to high transaction costs while also makes farmers very vulnerable. Thus, this study suggests well-designed institutions and institutional arraignments for inputs and service delivery system including good governance thereby help creation of consistent livestock commercialization and ensure food security in the area.
Keywords: smallholders’, commercialization, institutional challenges, Mieso and Gumbi-Bordode