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The most important goal for development efforts in developing countries like Ethiopia is to reduce poverty. Poverty in Ethiopia has been described as mostly a rural phenomenon. Though over the past decade Ethiopia has made significant strides in improving the living standards of its citizens, an increasingly large number of men and women are unable to move out of poverty because of a deteriorating asset base, inappropriate policies, institutions and processes. The vulnerability to poverty of households in the region is also found to be high as a substantial share of those currently above the poverty line are highly vulnerable to poverty in the future. Therefore ex ante measures to prevent households from becoming poor as well as ex post measures to alleviate those already in poverty should be combined in evaluating poverty reduction strategies.