The Role of Microfinance Institutions on Poverty Alleviation in Ethiopia

Dr. D. Guruswamy .

Abstract


Microfinance can be a critical element of an effective poverty reduction strategy mostly for developing countries. Particularly in Ethiopia there is lack of improved access and efficient provision of savings, credit, and insurance facilities to develop their businesses, enhance their income earning capacity, and enjoy an improved quality of life. The objectives of this paper are to asses the role of MFI (DECSI) on poverty reduction, to evaluate how the MFI (DECSI) helps to change their (poor) economy and to point out the significance of the provision of MF service to brake grinding cycle of poverty. In this study both secondary and primary data via self-administered questionnaires and interviews were used. Following the information collected from both MFI’s managers and their clients, it was revealed that MFI have changed the life of poor people in a positive way. Despite these achievements it was further observed that some conditions like high interest rates, loan application process & approval, collateral, service delivery and lack of close relationship between institution management and the borrowers have been limiting factors for poor people to access the MFI services.

Keywords


Microfinance Institution, Savings Institution, Poverty Alleviation, Income.

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