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,

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