This document summarizes the results of a study on the role of microcredit in reducing women's poverty in Ethiopia through three microfinance institutions. The study found that: 1) The microfinance institutions did not adequately target poor women, as average loan balances were above 20% of per capita income. 2) Loan sizes were small and repayment schedules were too frequent, limiting their impact. 3) Women predominantly used loans for consumption and low-return businesses like food preparation, rather than higher-return investments. 4) While some positive impacts like increased consumption were found, microcredit did not significantly increase women's income, employment, or savings overall. The document recommends that microfinance institutions in Ethiop

1. The Role of Micro Credit to Reduce Women’s
Poverty in Ethiopia: The Case of Three Selected
Microfinance Institutions

2. Presentation Outline
1. Background
2. Methodology
3. Result
4. Conclusion
5. Recommendation

3. Background
 Every day, 1.2 billion people cannot fulfill their
basic needs.
 The majority of these people are women & children
(International Fund for Agricultural Development, 2009: 6).
 Women are the majority of the 1.5 billion people
living on $1 a day or less
 Poverty is becoming a critical problem.

4. Cntd
 70% of the world’s poor are women (UNDP,
1995; UN 1996).
 The incidence of poverty among women is
increasing and many researchers came to call
the trend as “feminization of poverty.”
 The situation of women in Ethiopia is not
different from women elsewhere.

5. Cntd
• Many causes for the feminization of poverty
– lack of access to land & credit
– lack of income, assets, employment opportunities, skills,
education, health & infrastructure (USAID 2012).
– growth of female headed households,
– intra household inequalities,
– bias against women & girls,
– population growth, deteriorating environment & low productivity
as well as economic crises
– Gender based division of labour & etc (Moghadam ,2005).

6. Cntd.
• improving access to credit for women has been
underlined to solve women’s poverty problem since
1995.
• Hence, MFI have evolved & Expanded
• The popularity of Microfinance has increased after
Muhammad Yunus ( Grameen Bank) established a rural
project in Bangladesh and become successful in
reducing poverty.

7. Cntd
• following the Grameen bank model, many microfinance
institutions all over the world were established
• The main aim of these institutions was to provide
microcredit services to the poor who were excluded by
formal financial systems & exploited by local money
lenders.

8. Cntd
• A number of studies have discovered the success of MFI in
improving the wellbeing of women and their families eg.
• profits from Grameen financed businesses were increasing
borrowers’ consumption by 18% per year, and
• that the percentage of Grameen borrowers living in
extreme poverty was reduced by 70% within 4 years of
joining ( World Bank cited in Latifee 2003: 6 ).

9. • In Tanzania/Zanzibar too the income and asset values of
borrowers were found increasing almost twice than that
of non-borrowers (Mohamed 2003 cited in Beyene
2008).

10. Does Microcredit really help the poor to lift
out of poverty?
• Studies on Ethiopian MFIs give much focus on
financial performance & profitability of the
institutions than their social impact e.g Yirsaw
(2008), Ejigu (2009)
• The available social impact studies (eg. Getaneh
(2004, 2006 & 2007), Bekele (N.d.), Daba (2003),
Borchgrevink et.al (2003) are not comprehensive
either
• Hence, this research is conducted to give a
comprehensive view of the major MFI in light of
their role in helping women to reduce poverty.

11. Methodology
• Research Method- Qualitative
• Research design- Case Study
• Data Source-Secondary
• Data Analysis-Interpretive
Limitation of the research
• Lack of primary data
• Information constraint (missing data) did not enable
the researcher to fully enrich the finding.

12. Result
• impact assessment of the MFIS was examined
through two main pillars
• Outreach to the poor
• Welfare impact

13. Outreach to the poor
• Outreach means how many clients are being served
• breadth and depth of outreach
• Breadth of outreach was measured by the number of
active clients ( or accounts that are active at a given
point in time.
• Depth of outreach helps to understand client’s
poverty level & was measured by
– average outstanding balance /GNI per capita.
– Percentage of women borrowers

14. Cntd
• Literature indicates that average outstanding loan
balance below 20% of per capita GNI is considered as
an indication that clients are very poor (Rosenberg,
2009: 4)
• average outstanding loan balance per capita GNI of the
selected MFIs is more than 20% which is an indication
that the selected MFIs did not give much focus on
clients poverty level and hence women.

15. Depth of Outreach :
Average outstanding loan balance per capita GNI 2006-2009

16. • MFIs high level of average outstanding loan balance
implies that the MFIs did not target the poor people
which is also in contrary to the very establishment of
MFIs; providing credit for the poor people.

17. Depth of Outreach : Percentage of women
borrowers
• Though ACSI shows a steady increase in its trend of
female outreach
• DECSI & OCSSCO shows unpredictability which makes
it difficult to analyze.
• However, on average it is possible to conclude that all
the selected microfinance institutions have narrow
outreach for women clients.

19. Breadth of outreach: number of active clients
• the number of total active borrowers is increasing except
DECSI shows a decline in 2006 due to environmental
crises that occurred in the region and clients were reserved
from borrowing due to the fear that they may not pay the
loan back.
• OCSSCO in 2008 & ACSI in 2009 also experience a
• decline in total number of active clients due to the global
financial crisis that challenged the institution’s financial
capacity to extend service.

21. Cntd
• Generally, data both from breadth & depth of outreach
indicators show MFIs did not take the very
disadvantages position of women into consideration
which is in contrary to the experiences of Grameen
Bank which is mentioned as successful in reaching
women and help them free from poverty.

22. MFI welfare Impact
• Microfinance is expected to improve the living standard of
clients through increasing income, asset, saving as well as
jobs.
• A study conducted by Samuel & Negash (2010) on DECSI
shows that household food expenditure was in average lower
for DECSI credit participants than non participant
neighbors.
• Household items and jeweler purchase was also significantly
lower for DECSI loan participants relative to non-
participants.

23. Cntd
• Getaneh (2001) study of ACSI clients (119 women and
361 men) shows that 79.2% of clients have had some kind
of savings which they hold either in cash (57.9%) or in
kind (21.3%) and more women were found saving in cash
than in kind.
• In addition, of those who said, they save in cash, 34% save
at home, 8.9 % in Bank and the rest in other alternatives.
• This indicates that the MFI did not motivate clients to save
in the Bank, MFI or women have little to save and that is
why they prefer to save at home.
• Literature shows that the poor will save at home when the
amount of savings is very small and is not enough to
invest in productive resources (Sunita 2003).

24. • The fact that majority of women interviewed save in cash and they save
at home implies that women are using the money for consumption
purpose than other productive activities.
• The poor have to save to buy clothes and also participate in social life
such as religious activities, funerals, and other ceremonies.
• saving at home leads clients to misuse their savings as they can take the
money anytime they feel a need than using it for other income
generating activities and future business developments.
• Related to this, Beyene (2008) has found out that women in Ethiopia
use the money they borrowed from MFIs for daily consumption and
consequently they do not have enough savings that can help them to
establish medium enterprises.

25. Table 4: Women’s Saving culture in ACSI
Source: Getaneh 2001: 27

26. Cntd
• a study done by Tesfaye (2003) on the impact of
DECSI on women in Tigray region has also found that
only 13.4 % of clients reported that their income has
increased due to the loan while 48% responded that
their income stayed the same (p.24).
• This is also an indication that the credit service
provided by DECSI did not change the majority of
client’s income level.

27. Cntd
• Daba (2003) study on the impact of OCSSCO on borrowers
income level, household diet, access to education,
employment opportunities and saving has found that
• the majority of women clients reported average yearly
income of between 1001-2000 Ethiopian birr
• which is very low in relation to the cost of living and only
one woman was found having more than 4000 birr.
• as the income level increased the number of women has
decreased.

28. Table 5: OCSSCO Clients Income Level (in Eastern
Wollega Zone).
Source: Daba 2003: 35

29. Cntd.
• Dinkayehu (2006) study on the role of the OCSSCO in
improving the living standards of the poor people
 42 % their household income has increased
 40 % their overall income has decreased.
 37.5 % their family members attending school has increase
d
 32.5% said it has decreased.
 53.5% said their employment opportunities did not improv
e
 46.5% said it was improved.

30. • One can understand from these figures that there is no
significant variation between those who said their
• income has increased and those who said their income
has decreased as well as those who said their schooling
has increased and /or decreased.
• These all figures show that MC does not contribute
• much for clients to increase not only in their income
• level but also in employment opportunities as well as
• in children’s education.

31. • Generally, the available limited data on microcredit’s
welfare impact show that all the three MFIs did not
contribute much for helping women to increase in their
income, employment and saving so as to escape from
poverty.
• However, clients were found improving their household diet
and consumption.
• Borrowing to smooth consumption is not bad, as it can help
people survive hard times.
• But, borrowing for consumption can also lead for
indebtedness.

32. Why is the low contribution of MFI’s on
Women’s poverty in Ethiopia
1. Interest rate
• The selected Microfinance institutions charge high
interest rate compared to the private & commercial banks
which is in contradiction to the main aim of establishing
MFI.
• the high interest rate will have a negative impact on the
poverty reduction capacity of the micro-loan as it did not
result in saving.

34. B/ Loan Size and Repayment Schedule

35. Loan Size cont.

36. Loan Size cont.

37. C/ Type and nature of business women are
engaged
• significant change is not observed in the ability of
women in participating in profitable business.
• Women borrowers in all the selected MFIs were
engaged in traditional activities, activities that they
learn from their families, neighbors and/ or may be
friends.

38. • Tesfaye (2003) study of the impact of DECSI in
Tigray region found that the main occupation in
which borrowers were engaged was
– farming 58.3%
– preparing and selling beverages (such as Tella & Araki,
34.0 %,
– animal fattening 23.6% & in buying and selling grains
and other agricultural products 18.9%
– in private micro business 33.9%
• In addition, Meehan (2001) study on DECSI shows
that 72 percent of women who had received the
loan use it for cereal trading.
• livestock trading which has high return was an
exclusively male activity while coffee trading and
beer making were exclusive to women (Meehan,
2001)

39. • Similarly, Dinkayehu (2006) study on clients of OCS
SCO shows that major types of business activities clie
nts were engaged after the loan was
– 15.5% local drinking preparation,
– 11.5 % selling Injera,
– 15% wood/metal work,
– 4% textiles,
– 0.5% beauty salon,
– 3% agricultural activities,
– 1% animal husbandry, and 21.5% retail trade.

40. • women engagement in preparing and selling
beverage is tedious and have very low return. Hence,
the profits generated by engaging in this kind of
business activities are insufficient for women to step
over the poverty in any sustainable way.

41. • OCSSCO report in 2012 shows that small and medium
enterprise outreach trend by the company is declining
while its total loan disbursement trend is increasing
• This implies that clients are taking the loan for other
purposes than for business development

43. • Getaneh (2007) study on the impact of ACSI in Amhara
region has concluded that the loan that has been taken for
‘micro-enterprise’ purposes has been used for
consumption activities.
• Of the 689 clients he collected the data; about 128 have
used the money away from microenterprise.
• In addition, some differences have been observed
between men and women clients
• women were focusing on food: purchase of food for the
household, purchase of cloth for household members,
giving money for spouse or other household members,
making reserves for loan repayment or other
emergencies, pay loans taken from other sources and etc.
• Moreover, absence of strong business development or
skill up-grading educational programs were constraints
that limit clients from engaging in income generating
activities (P. 17).

44. Cntd.

45. Conclusion
 the selected MFIs concentrate on agricultural lending ( purchase of
livestock followed by purchase of farm input) than business
( Wolday, 2008).
 Thought MFI focused on providing loan for agricultural purpose e.
g buying ox, the loan size was not sufficient compared to the pri
ce of farm inputs to be purchased.
 The institutions did not provide sufficient training for their clients.
The evidence shows that clients lack business knowledge and skill.
Consequently, they are engaged in low profitable businesses.

46.  There is high average outstanding balance per capita
GNI which shows that there is selection bias.
 MFIs lend for the better of people than the poor.
 there is low outreach for women, Hence, women still
lack access to MFI.
 Though there are some positive contributions on
welfare status , it is not sufficient
 There is high interest rate and the size of the loan is
small.

47. "Poor people didn’t create poverty. It's the system
that created the poverty. And, if we want to end
poverty, we have to change the system."
Professor Muhammad Yunus
(http://www.microcreditsummit.org/about-the-
summits.html).

48. Recommendation
• Providing large amount of loan with low interest
rate and make rural people to use their land as
collateral will help
• lending should go to small and medium businesses
capable of creating jobs not to the subsistence
activities in the informal sector.
• There has to be ways to provide business
development skill.

49. Cntd.
 MFI need to expand their outreach for women
 Comprehensive research is needed to examine the welfare
impact of MFIs particularly on women.

50. Thank You !!!