The Effect of Micro-finance on Poverty Reduction (In Case of Oromia Credit and Saving S.C. in Northern Shoa Zone)

Abstract

Microfinance institutions are found among the institutions, which provide different financial service for the poor who are out of the conventional banking system particularly in developing countries. Thus, this study try to examine the impact of the microfinance program on socio economic activities of the poor in oromia credit and saving share company at North shoa zone of Oromia regional state, Ethiopia. The researcher collects a data on 2000 clients using multi stage sampling procedure. The methods of analysis used are both descriptive and inferential (logit model). From the results, we observed that program intervention leads to change in the life of the people than that would have happened without the intervention. The program increases the probability of improvement in economic status of the clients. The changes more likely occur with program participation than without program participation. The study indicates about 95% of sample clients reported that their live conditions have been improved because of program participation while only 20% of sample non-clients reported the trend that their living conditions have been improved because of good agricultural season and petty trade using their own income for the last two years. Moreover, the result indicates that more clients have enjoyed diet improvement than non-clients have. Clients have more chance of improving their diet in comparison to non-clients. Considering school-age children and actual enrollment, the result does not show significant difference between the two groups. Microfinance programimproves job opportunities through expandingnew business activities. The program also has brought and develops the habit of savings among its clients and expected to empower women clients over business activities of household. However, it is difficult to suggest the impact on women empowerment since the result does not show much difference between the two groups. Considering outreach and sustainability of the company in sample branch, the result indicates the trend that the numbers of clients and amount disbursed have been increased. About 100% of loan repayment within a given maturity date has been observed for the last four years. Loan issue on time, supervision, income, asset, having high attitude to cost of default and loan repayment time are the most factors that help loan repayment within a given period of time. Generally, the company has been directing its efforts towards poverty reduction and has showed success in terms of advice and supervision of clients in loan utilization.