The Role of Microfinancing Programmes and the Success of Small Businesses in Urban Ethiopia: A Case Study of Addis Ababa
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Date
2001-01
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A.A.U
Abstract
The study examined the role of micro financing programmers and the success of small businesses
in urban Ethiopia considering the case of the POCSSBO micro financing programmers in Addis
Ababa. The investigation is based on descriptive analysis and identification of the determinants
of the probability of success in beneficiaries' businesses using the legit model. The data used for
the study is primary and cross-sectional, collected with the help of structured questionnaire
between March and April 2000, from a sample of 236 beneficiaries who benefited from
POCSSBO micro financing scheme in Addis Ababa.
The results indicate that the POCSSBO micro financing scheme contributed positively to
employment creation and income generation which paves the way for the development of micro
enterprises. Through the expansion of self employment opportunities to the beneficiaries of the
programmers the credit scheme played a key role in raising the beneficiaries' income.
The maximum likelihood estimation result of the legit model reveals the existence of some factors
that significantly influence the probability of success in beneficiaries' businesses. The results
indicate that the initial loan size, sufficiency of the loan for intended purposes, training given to
borrowers before the loan, convenience of business area, business experience before the loan
and high school level education of borrowers are important determinants of the probability of
success in beneficiaries' businesses.
Of these determinant factors of the probability of success in beneficiaries' businesses, sufficiency
of the loan for intended purposes, training given to borrowers before the loan, convenience of
business area, business experience before the loan and high school level education of borrowers
are found to be enhancing factors of the probability of success in beneficiaries' businesses. On
the contrary, the initial loan size is found to be inhibiting factor of the probability of success in
beneficiaries' businesses. The project office should take into consideration these enhancing and
inhibiting factors of the probability of success in beneficiaries' businesses in designing improved
micro financing programmers in the future.
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Keywords
Businesses in Urban Ethiopia, Microfinancing Programmes