Evaluating the effects pf microfinance service on urban poverty reduction: the case of Arada Sub-city

Course ID
Ethiopian Economics Association (EEA)
Esubalew Alehegn

The growth of interest in microfinance development during the last two decades has led many funding and government agencies to support microfinance operations. The collective experience of these agencies confirm that microfinance can play an important role in poverty reduction and the economic and social benefits of the service can be large.
Microfinance has become one of the critical emerging issues of developing countries and are often seen by donors and aid practitioners as a manifestly effective means of improving the position of the poor. The premises of this paper hinge up on the following merits of microfinance. It provides ways to assist and empower poor women who make up a significant proportion of the poor and suffer disproportionately from poverty .It improves access and efficient provision of savings & credit. It enables the poor to smooth their consumption, manage their risks better, build their assets gradually, develop their micro enterprises, & enhance their income earning capacity. It gives improved quality of life, contribute to the improvement of resource allocation, promotes market link, leads to adoption of better technology, helps to promote economic growth and development, and contribute to the development of the overall financial system through integration of financial markets.
Taking the above premises into account this paper evaluated the effects of microfinance service on urban poverty reduction at Arada Sub-City of Addis Credit and Saving Institution. Data to undertake the study came from cross-sectional survey made in the month of January 2006. Close and open-ended questionnaires were distributed to the systematic randomly selected respondents (clients and non-clients). Close-ended questionnaires were analyzed through descriptive statistics and econometric models while the open-ended questionnaires were analyzed through focus group discussion.
The finding of the study reveals that microfinance service has not brought significant impact on the life standard of the clients. Interest rate, collateral issues, loan maturity, loan disbursement, repayment period, and lack of qualified staffs were found to be statistically significant in affecting clients to sustain their membership. Sex and gained or missed benefits by clients and non-clients willingness to have microfinance service in the future are significant at 90 and 95% confidence intervals. The result suggests that if such constraints aren’t addressed promptly, microfinance services will not have any meaningful impact on urban poverty reduction. Hence if the service is to be an efficient poverty reduction tool, it has to bring a significant change in the living standard of the poor

Corporate Author: Getnet Alemu and Edilegnaw Wale (Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: Ethiopian Economic Association (EEA)
ISBN/ISSN: 978-99944-54-05-1
Primary Descriptors: microfinance

Secondary Descriptor: poverty r

Geographic Descriptors: Ethiopia, Addis Ababa
Cataloge Date: 02/27/2013
Broad Subject heading: Finance and Development
Call Number: 330.963 PRO 2009
Serial Key Title: Proceedings of the Fifth International Conference on the Ethiopian Economy
Publication catagory: International Conference
Content type: EEA Publication
Volume: I
Publication date: 2013-12-27 23:09:00
Forum or Discussion date: 2013-02-27 15:02:12
Place of publication: Addis Ababa, Ethiopia
Type of material: Book
Current frequency: Annualy
Author: Esubalew Alehegn

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