Microfinance and Livelihood of Enset-Based Smallholders: The Case of omo Microfinance In Cheha Woreda, Gurage Zone
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Date
2013-07
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Publisher
AAU
Abstract
Despite controversies on the impact it has on poor households, MFIs are growing and operating in
various regions of Ethiopia and in different socio-economic settings, by applying a similar approach.
While the considerable number ofGurage enset culture smallholders are interacting with micro finance,
empirical studies are lacking that reveals the overall situation of the interaction.
With the objective of examining the scenario of the interaction of smallholders with MFls particularly,
Omo, in a setting characterized by traditional farming, small and fragmented land holding;
agricultural production is dominated by perennial ensent crop for subsistence. For this purpose, Enata
Kebele in Cheha Woreda has been selected as a point of reference. By applying more of a qualitative
approach, data is collected by using tools like participant observations, in-depth interviews, case
studies, FGDs, key informant interviews and ethnographic conversation.
The study reveals that the actual factors that push smallholders to access credits from Omo deviate
from the intended purposes of micro finance. Only a fow smallholders' actual factors fit with the
intended purpose, while the majority accesses credit with the intention of using it to address other
intended socio-economic issues. They don 't only use the credit off the target, the also misuse it, waste it
for unnecessary activities and fraction the credit into several parts rather than using it for one planned
economic activity. This study also displays, though credits should have to be given for those who can
repay it with incomes generated in a short period of time, due to the poor recruitment and evaluation,
smallholders ' credit request is rarely negatively responded by Omo micro finance. Even if the study
area has a good repayment rate, it is not an indicator of positive change; it rather is the result of asset
reduction and indebtedness for repayment.
The impact assessment of this study shows fow success stories from those who attempted to use the
credit for business activities. The negative side is manifested by reducing assets of smallholders,
causing conflict among family members, forther indebtedness, psychological stress and enhances the
exploitation of smallholders by local money lenders. The challenges that contribute for this are poor
client selection, absence of regulations, training and advice to smallholders, little promotion for saving,
inappropriate usage of credits, poor institution capacity and risks in the smallholders setting. Since the
improvement brought by Omo Microcredit is witnessed in only few household, the majority studied
smallholders have developed a negative attitude towards Omo Microfinance. This study finally
concludes, while the credit can be successfol for those households determined to engage in regular
trade, the situation of the majority studied smallholders will be more disastrous if they do not managed
to withdraw early from Omo at all costs.