Challenges and Prospects of Introducing Sustainable Microfinance Services in Afar Pastoral Population
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Date
2011-07
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Addis Ababa University
Abstract
Background: Afar regional state is one of the pastoral dominant livelihoods in the country. Like
any other pastoralists Afar region was also neglected from developmental activities and services
like microfinance institutions. The reason why such MFI did not exist in the region was not
studied before. This study explores challenges and prospects of introducing sustainable
microfinance services in the region focusing on the pastoral people.
Objective: This study explores challenges and prospects of introducing sustainable microfinance
services Afar pastoral population and the demand for the service.
Methods: The study employed a mix of both quantitative and qualitative methodology employing
semi structured and in-depth interviews with 60 pastoralists from two markets in zone one of
Aysa‟ita and Logia markets, 5 cooperative leaders from Aysa‟ita woreda, and 8 key informants.
The participants were selected from two markets (Logia and Aysaita) purposive sampling.
Findings: Among the pastoralist sample, a substantial number of participants were found with
high need for microfinance services at the same time with lack of awareness as how to diversify
income generating activities. They show also a good habit of informal lending and borrowing
with good repayment culture aided by clan based court (mablo). With regard to saving they are
poor in saving but they show a need of formal MFIs for saving, money transfer, and credit
services. NGO and government led cooperatives were not as such effective in their five years
journey. The region has some specific constraints which increase cost of providing microfinance
services to the pastoral community: such as harsh climate, highly dispersed settlement, poor
infrastructure and socio economic conditions and other constraints. Interest issue is the most
sensitive challenge observed from the study regarding failure of introducing MFI in the region.
Conclusion: form the study it was concluded that there are specific constraints which could
increase cost of providing services to the pastoralists. However, there are also compromising
factors which help sustainable microfinance service like good demand and culture of repayment
enforcement by the cultural court.
Recommendation: Multi-faceted interventions on issues of income diversification and business
skill of pastoralists should be carried out so as to create awareness about business, and so as to
encourage need of the people for credit and saving services. Integration should be maintained
with interventionists so as to cover operational costs and the product design should also cope
with beneficiaries‟ culture
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Keywords
pastoral population, Microfinance services