Dereje Chimdessa Kumsa , Admassu Tesso Huluka, Dereje Tolera Geleta

This study investigated the relationship between livelihood assets and capabilities in rural households of East Wallaga Zone, Southwest Ethiopia, to understand how they contribute to sustainable development. The analysis, using Structural Equation Modelling (SEM), examined factors such as social engagement, land size, education, animal ownership, irrigation, and household size as indicators of assets, while productivity, income diversification, service accessibility, and savings reflected capabilities. The findings revealed that access to irrigation, livestock ownership, and education significantly enhanced household capabilities, promoting sustainable development through increased income diversification and productivity. The study underscores the importance of targeted interventions to strengthen household capabilities and access to resources, which are vital for long-term growth and resilience in rural communities.