Impact Assessment of Microfinance in Amhara Region of Ethiopia

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Impact Assessment of Microfinance in Amhara
Region of Ethiopia

• Getaneh Gobezie
• Amhara Credit Saving Institution (ACSI)
• (getanehg2002_at_yahoo.com)
• International Conference on Rural Finance
  Research Moving Results into Policies
• 19-21 March 2007
• FAO Headquarters, Rome Italy

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Objectives of the Study

• To better understand the if and how
• Micro-finance services, strengthen businesses
• improve the welfare of microentrepreneurs and
  their households, communities
• To Improve Impact

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Impact Assessment Approaches

• Assessing the impact -- three methodological
  Challenges
• 1) the problem of counterfactual, which has to do
  with evaluating what the welfare levels would be
  if the anti-poverty programme did not exist
  ("with-out project" situation) (Attribution
  Problem)
• 2) the fungibility of money the cash could be
  used for on-lending, for immediate consumption
  needs, to repay loans as well as to invest in an
  income generating activity
• 3) the selectivity problem thus the effect of
  say the anti-poverty programme may be over
  (under) estimated if programme participants are
  more (less) able, due to certain unobservable
  benefits compared to eligible non-participants

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Approaches.

• Fungibility
• The Household Economic Portfolio Model (Chen
  Dunn, 1996)
• --Household as a Single Economic Unit
• --Microenterprise, part of the larger
  household economy
• --loan funds can be allocated to any
  activity in the HH (production, consumption, and
  investment activities)
• Attribution
• qualitative method, see chain of events
  (cause-effect)
• Self-selection bias
• comparison groups --Mature clients, incoming
  clients

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Approaches.

• Quantitative and Qualitative studies
• Quantitative (690 clients)
• mature clients (gt60 months) and new clients (lt12
  months)
• Qualitative from individual and group
  interviewing
• Resulting information is then triangulated
• Of the 179 area offices, 15 were selected (based
  on criteria including the percentage of women
  clients, accessibility of the communities, food
  security and rural and peri-urban areas)

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Preliminary Findings

• Profit Making
• Net profit, one product cycle (8 months)
• Mature clients 'net' profit (average Br. 1930)
  new clients Br 1560 (significant)
• monthly net profit of mature client is about Br.
  241, compared to the Minimum Wage (set by Trade
  Unions) of Br.250/month
• 70 acquired skill to calculate loss and profit

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Welfare Conditions between Matured and Incoming Clients Welfare Conditions between Matured and Incoming Clients Welfare Conditions between Matured and Incoming Clients Welfare Conditions between Matured and Incoming Clients
Description Choices Clients (Mature Vs. Incoming) Clients (Mature Vs. Incoming)
Description Choices gt5 year lt1 year
food shortage over the past 12 months? Have Faced food shortages 49 14.16 72 20.87
food shortage over the past 12 months? Have Not Faced food shortages 297 85.84 273 79.13
food shortage over the past 12 months? Total 346 345
any one in house-hold managed to see a doctor last year? Managed to see a doctor 183 53.67 158 46.33
any one in house-hold managed to see a doctor last year? Total 339 340
Proportion of school age children going to school Going to School 248 77.1 174 68.2
Proportion of school age children going to school Not going to school 74 22.8 82 31.8
Proportion of school age children going to school Total 322 256
housing improvements worth Br.100 last two years Made improvements 166 47.98 86 24.93
housing improvements worth Br.100 last two years Have Not Made improvements 180 52.02 259 75.07
housing improvements worth Br.100 last two years Total 346 345
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Preliminary Findings..

• Consumption Smoothing
• ''loan taken for 'microenterprise' used for
  consumption smoothing in 128 cases out of the 689
  clients (mature and new)
• Expenditure include
• 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,
• purchase or renew houses,
• cover costs for wedding parties or related
  expenses,
• cover school or medical expenses, etc

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Preliminary Findings..

• Empowerment
• qualitative tool show that clients have increased
  self esteem and self confidence (54 of 60) since
  joining the programme, better able to negotiate
  with husband, etc
• But social capital now reduced in some areras
• in some Muslim areas, getting involved in
  microfinance or banking services is still
  considered Haram (forbidden activity), and the
  local religious leaders advise that those who are
  going to such services should be isolated from
  the rest of true believers, as they are
  violating rules
• empowerment at household/enterprise/individual
  level DOESNT Translate into empowerment at
  community level

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Preliminary Findings..

• Some Verbatim
• I used to lead a life which is no better than a
  death
• I just used to live an empty life
• My life was just watching day and night as they
  go
• I dont like to talk about the dark age, there
  is nothing to tell
• Now I and my children eat enough, I wear white
  clothes .like any other people
• Now people are listening to what I say, and I am
  asked for some consultancy (in business, etc)
• Now I can contribute to social activities, I
  cannot be isolated
• Now I am invited to ceremonies, I go there and I
  sit on a big chair
• Now my daughter is sought for marriage
• My dream is for my daughter NEVER TO DO what I am
  doing now, but to get better educated like you
  interviewer!!
• We were praying for God, and there we have this
  MFI

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Challenges for Microfinance Growth

• Clients Business absorptive capacity
• Agricultural Extension, Low coverage
• Business Devt. Service, Low coverage
• Poor market infrastructure (Road, Mkt Info)
• Cultural problems
• Cultural Bias (non-traditional activities frowned
  at
• Limited Income Perspective
• Backward-Bending Labour Supply Curve?
• The Woman Issue (Skill, Time Poverty.)

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Recommendations

• Govt., Donors, NGO, Other Stakeholder
• Rural infrastructure (roads, markets, etc)
• BDS service (Agric. Technology, small scale
  industries, etc)
• Women (skill, labour saving technologies.)
• Cultural transformation -- Entrepreneurship
• Service Provider
• MFI Capacity to Diversifying methodology
• Awareness (on microfinance, market economy, etc)

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• Thank You