The Effectiveness of Saving and Credit Cooperatives on Income Enhancement of Borrowers: The Case of Women Participants in Wereda 04, Kirkos Sub City, Addis Ababa
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Date
2020-06
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Addis Ababa University
Abstract
Microcredit is being practiced in Ethiopia as a tool to deliver financial services to
help the poor reducing poverty. The saving and credit cooperatives(SACCOs) are
therefore operational to address the problem of poverty by delivering micro credit
particularly to those low income members who participate in saving and credit
cooperatives organized by themselves. The ability of microfinance and microcredit
programmes to alleviate poverty and enhance development is often debated and
questioned. In order to investigate the fundamental premise, this study examined
empirical evidence of saving and credit cooperatives (SACCO) to know their efficiency and
aims to contribute to this literature by investigating their role on income enhancement
of women members/ borrowers in Wereda 04, Kirkos sub-city, Addis Ababa, organized
by one of the largest NGO, WISE (Women in self Employment), using systematic
random sampling technique taken from the total list of members (N=284). Hence, the
total numbers of households interviewed were 121; out of the total (284) members in
the list using Yeman’s sampling formula. The data was collected from six years
(2013-2018) of saving and a loan of the SACCO members. A household level survey
was carried out to collect data about individuals receiving microcredit. Using a
quasi-experimental research design, this study supports the extant literature that found
a positive role of SACCO programmes on enhancing the participants’ income,
expenditure, food and children’s education. In addition, the results reveal a significant
positive correlation between microcredit and an increase in recipients’ business profits
and capital. The study is referred to common challenges in microcredit business that
apparently microcredit institutions in Addis Ababa are facing. Lastly, the study
provides some insights on how to enhance the programmes effectiveness on incomes
improvement. In general, for these programmes to be more effective in alleviating
poverty a new paradigm or regulatory body is required to link microcredit institutions
with each other, organize collective efforts, and make it more attached to the real
developmental needs of the poor.
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Keywords
Microcredit, saving and credit cooperaratives, kirkos sub city, wereda 04,