The Impact of Microfinance Services on the Living Conditions of Households with Low Income Earning: The Case of Addis Ababa
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2008-02
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Abstract
Ethiopia is one of the least developed countries with high incidence of poverty. Poverty reduction has been the center of development strategy in the country. Microfinance program on the other hand have been accepted as instruments in fighting against poverty through out the world. Since 1996, Microfinance institutions (MFIs) in Ethiopia have been developed both in size and program out reaches. Currently there are 27 MFIs in the country. Despite of its expansion, little is known about the impact of the program in changing the life of the low income households. The study therefore, tries to fill some of this gap by taking Addis Ababa as a case study. To meet the objective of the study, both primary and secondary data were used. For the primary data, two kebeles from Addis Kifle Ketema were selected. 200 households were interviewed using random sampling. For data analysis, descriptive statistical and econometric model were adopted both for the entire sample and for various income groups. The study indicates that microfinance improves low income earning households’ economic status. Households’ income, expenditure and asset are improved as a result of program participation. But the result is not uniform for various income groups. For relatively better-off households the impact is comparatively high in expenditure, whereas for low income households the impact is highly explained in terms of increase in household asset this would imply that the relative success of the program depends on the amount of the loan and its utilization.
Moreover, in this study there is evidence that microfinance improves the non economic dimension of poverty. It improves social acceptance and decision making of women. But, the result also indicates that credit alone does not improve the status of the poor if it is not substantiated by other technical supports that help the low income households to cope up with short term problems and enabling them better competitive in the long run.
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Economic Policy Analysis