The Impact of Microfinance In Ethiopia The Case of Decsi In Ganta-Afeshum Woreda of Eastern Tigray
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Date
2003-06
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Addis Ababauniversity
Abstract
In recent ,·cars the growth and expansion of micro finance programs and increas ing attention to
micro l·inance as a poverty reduction strategy have given rise to a number of questions . What
impacts occur at the household, enterprise/farm and individual levels? Are the impacts posi tive
,)r negati,/' 00 the impacts vary among different sub-groups of cl ients') These questions were
addressed in this cross sectional impact assessment survey of OECSl"s microtinancing scheme in
Tigra'·. The tindings have implications for understanding the context in ,,·hich microtinance
programs operate and the impact of microfinances on the clients' welfare and business stabilitv
in Eth iopia and e lsewhere. The main objective of the assessment is to determi ne the nature,
e"tent and distri but ion of impacts from pal1icipation in OECS[" s micro financing scheme. the
secondary objectives are to better understand the general environment of the country on which
the microfinance institutions are operating and to understand the role of microfinancing services
on the household economy.
The o,·erall impact assessment includes the co llection of survey data tl'om frequent cl ients of the
program and a new clients comparison in the study area (Ganta-Afeshum Woreda of Eastern
Tigray),the evaluation is driven by a set of impact hypotheses which were derived from the
USAIO' s A!MS project conceptual fi'amework with some modifications to consider the situation
of the study area. The survey data are supplemented by qualitative information tl-om focus
groups. The surve,· included a total of 216 respondents of which 109 are freque nt clients
(experiment groups) and !07 were new clients (control groups), A two stage sample selection
approach '\oIS used: I) two settlement areas (urban and rural areas) were selected in the first
sta~e . 2) COlllrol and experiment groups were randomly selected from both the rural and urban
settlement areas in the second stage.
The surveY reveals that both the frequent and new clients are similar in most of the individual
Cln,i household characteri stics. With regard to the impact result. the survey result suggests that.
OECSI's ll1icrotinancing scheme appears to have a positive impact on the cl ients overall
household income, sources of household income, acquisition of key ho usehold assets, housing
imprm·emcnt. access to education, and access to health facilities. However. the survey tindings
did not strong!'· evidenced regarding some of the impact variables such as women
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empowerment. food security, and coping with difficulties, Besides, the magnitude and type of
impact varies among different groups of the surve" respondents, That is the impact of the
program is better in the urban program areas than in the rural program areas except for clients
empom:nnent. which the rural clients have shown better involvement in the household and
business dec ision making acti vities and participation in any associations or gro ups in the
community,
O,'erall , microfinance makes a difference. The use of financial servIces by low income
households is associ ated with improvement with the value of the impact variables. However.
there is much variability in the nature and magnitude of the impact. which is mainly due to the
intluence of the macro environment. financial products and telms of the institution (DECSI).
regulatory environment of the country, and other social and economic factors. Therefore, to bring
about sustainable development and to reduce poverty in the country. more practical and sound
policy should be formulated in order to improve the impact magnitude of the micro finance
industry. Moreover. all development stakeholders should work together with the microfinance
programs. since it is only through working together that we can tackle the development
challenges of Ethiopia
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Case of Decsi In Ganta-Afeshum Woreda of Eastern Tigray