| Abstract: | Following the success history of Grameen Bank in Bangladesh, the importance of microfinance
institution as one of poverty reduction strategies has gained momentum in the policy agenda of several
countries, including Ethiopia. While many researchers agree that microfinance can reduce poverty, there
is still inconclusive evidence as to how microfinance helps the poor. Traditionally, microfinance impact
assessment used to be based on a narrowly defined poverty line using income/expenditure indicator.
However, the focus on increasing income overlooks the importance of microfinance services in
diversifying sources of income, building and protecting important household assets; which are the
dominant livelihood strategies of poor households. By drawing attention to the multiplicity of assets that
people make use of when constructing their livelihood, this study attempts to explore the different
pathways through which microfinance clients move out of poverty; using livelihood indicators of assets
like, housing quality, household fixed and movable assets, income source diversification and business
expansion (business turnover and profit level).
This study was conducted with the objective of investigating the impact of BG MFI services on the
livelihood of client households using a combination of cross-section and time series data. The study has
found out that BG MFI client households have improved their livelihood as indicated by the change in
livelihood indicators of housing quality, ownership of important household assets ( fixed and movable),
and improved their business turnover and profits. The research finding also shows that, ‘very poor’
client households benefited more from microfinance program in building important household assets,
than their ‘not- so- poor’ counterparts. Further, it was found out that there are varied socio-economic or
poverty graduation pathways depending on whether households are very poor or not so poor. Livelihood
improvement for very poor clients is more of asset, while the not so poor clients have improved their
business volume (even if the marginal change is not significantly high). This indicates, BG MFI has a
very strong value creation effect on the livelihood of very poor clients than that of not-so-poor clients.
Not-so- poor clients have very limited benefits from the program.
Therefore, as a pointer to future endeavors, the current services of BG MFI needs to be tailored towards
the livelihood strategies clients, depending on their poverty status. It also requires, further research to
have a clear picture of how poor clients benefit from MFI services; and investigate the different poverty
graduation pathways of client households |
