Chirkos, A.Y. (2014) The Impact of Microfinance on Living Standards, Empowerment and Poverty Alleviation of the Poor People in Ethiopia, A Case Study in ACSI, Research Journal of Finance and Accounting www.iiste.org ISSN. 5 (13), pp.43-66.
The article began by explaining the prevalence of poverty in Ethiopia and the important role of financial institutions to extract poor people out of poverty. Although access to formal financial institutions is too low, the author provided evidence that showed the importance of microfinances’ intervention in rural towns. Since the introduction of microfinances in Ethiopia in 1996, they have expanded their reach in the rural areas. One of the largest microfinances in Ethiopia is the Amhara Credit & Saving Institution ( ACSI) which operates and can be accessed across several kebeles of the Amhara region. Thus, the study focused on analysing the impact of microfinance on living standards, empowerment and poverty reduction in Ethiopia by examining two branch microfinance under the ACSI.
Microfinance plays a key role in alleviating poverty as it helps to improve livelihoods, reduce vulnerability and fosters social as well as economic empowerment. When Microfinances are properly implemented they increase income, enhance education and health status, improve housing conditions, empower the poor, provide confidence and social pride. Having access to financial services, not only provides a coping mechanism for unforeseen risks but also enhances their productivity and sustains their living standards.
The study was conducted in the Debretabor and Estie branches of ASCI. It employed systematic random sampling of 150 participants; 75 from each branch. The research used a case study design and both a quantitative and qualitative approach. Data collection instruments were questionnaires and interviews and descriptive statistics were employed as data analysis using SPSS.
The study found that the majority of the credit beneficiaries of the ACSI didn’t have previous business experience. Among the recipients of credit, the majority had personal savings apart from their forced loan guarantee. Findings indicated that the participants experienced a change in savings, employment opportunities, housing conditions and basic social services after receiving credit from microfinances. Changes in the participants’ life standards were demonstrated by access to education, health care, housing, clothing, and nutritional foods. In short, the study indicated that the overall quality of life improved as their income increased. The majority of the participants were satisfied with the loan services of ACSI because of its timeliness, fit for the purpose and provision of training about the credit. The participants acknowledged ACSI improved their life, helped their children access school and alleviated their poverty in multifaceted ways. Nearly all participants used ACSI as financial institutions with most of the loans used for income generating activities.
The study finally recommended the institutions should increase the grace and long-term loan return period. To expand the ASCI into rural areas, the government should build infrastructure and it should incorporate participant business skills in their training manuals.