THE IMPACT OF MICROFINANCE ON URBAN POVERTY REDUCTION; A CASE STUDY OF ADDIS CREDIT & SAVING INSTITUTION S.C IN KIRKOS SUB CITY, WOREDA 4, ADDIS ABABA, ETHIOPIA.

Abstract

The prevalence of poverty has been a common phenomenon in Ethiopia. The prevailing operation of the conventional financial institutions in Ethiopia is inefficient in providing financial services to the poor. The challenge Ethiopia is facing today is to reduce poverty and achieve sustained economic growth for healthy national development. One of the economic policies of the country is Expansion of MFIs in the country. Currently, microfinancing is being practiced in the country as a tool to deliver financial services to the poor with the objective of attacking poverty. AdCSI , one of the 27 licensed microfinance institutions in Ethiopia, was established in January 2000 in Addis Ababa for this purpose. The objective of this study, therefore, is to find out whether the delivery of financial services of the MFI has made changes on living standard of the clients. Primary data were collected through structured questionnaire from clients and non-clients using simple random sampling method. Secondary data were gathered from different MFIs’ reports and literatures. Both are quantitative and qualitative in nature. Descriptive analysis, dichotomous binary model and sensitivity analysis were applied in the study. The impacts are analyzed based on two approaches. First, the impacts are observed in association mainly with income, which in turn have effects on nutritional status, access to education and medical facilities, employment generation, savings and empowerment, among others. The finding indicates that the AdCSI’s Microfinancing scheme has made positive contribution to the clients in relation with observed variables. The impacts are also evaluated based on MFI’s outreach and sustainability having the conceptual framework that if both outreach and sustainability have been enhanced then the program intervention is judged to have a positive impact as it has created the financial market to the poor. The finding also indicates that in spite of improvement in outreach and sustainability, a number of respondents are looking for the services.