Abstract
The study argues poverty in Ethiopia is the function of incapable local institutions. It measures the existing capacities and challenges of the local institutions to translate development plans to action in the study area. For data acquisition, pre-tested structured questionnaires were administered to 100 randomly selected civil servants in ten local institutions. The study has found that the local institutions had neither development plans which match with the local conditions nor the necessary human, financial, physical and technological capacities to execute the consecutive development plans. In addition, the development plans of the local institutions were not supported by the necessary modern technologies. Hence, the local institutions failed to translate the subsequent development plans to action keeping the country poor with sluggish micro development record. The study calls for the federal government and international agencies to strengthen the capacities of the institutions to stimulate the local economy.
Key words: Organization/institution, capacity, local government.
