Role and Potential of 'Iqqub' in Ethiopia
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Date
2008-01
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A.A.U
Abstract
This paper examined the role of 'Iqqub ' with in the community. The findings show that
people participate in ' Iqqub' for more than economic reasons. With in the paper two
types of ' Iqqub' are identified, the Traditional small scale and simple ' Iqqub's and
Emerging large scale complex' Iqqub's. The operations, number of members they
incorporate, the cycle period and their fund allotment mechanisms of these two ' Iqqub's
differed widely. ' Iqqub' plays a dominant role in serving the financial needs of
households that are excluded from the formal sector due to bureaucratic working
processes and high collateral requirements. The paper also examined features of
emerging ' Iqqub' s, including safety, return, Liquidity, divisibility. The default rate as
observed in surveyed 'Iqqub's is very low, implying good collateral management and
loan screening in these informal financial sectors. The paper also examined the potential
of 'Iqqub ' to be further enhanced to provide more services and accordingly, two potential
areas were identified, based on other country's experience: Linking 'lqqub' with the
formal sector and transforming it into village bank. This potential of 'Iqqub', if
utilized effectively, can solve the existing problem of ' Iqqub' and makes it more
attractive, however further research in this areas must be made
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Keywords
'Iqqub' in Ethiopia, Role and Potential