Microfinance and Poverty Reduction

Microfinance institutions in Ethiopia, as is the case elsewhere in the developing world, have been established with the objective of reducing poverty. Therefore, whether this objective has been achieved merits special consideration by way of impact analysis. Against this objective, taking a random sample of 194 farm households, this study examines the impact of Amhara Credit and Savings Institute (ACSI) on poverty reduction in East Gojjam, Amhara region, Ethiopia. Results of the study indicate that microfinance helps farmers smooth out their consumption and augment their otherwise meagre incomes. Otherwise, its impact on poverty per se is not strong enough to suggest ACSI has achieved its objective it seeks to meet from the outset. Unless otherwise business training skills are provided to the farmers as part of the package, only loan provisions and savings services may not help a useful purpose. The repayment period was also found to be short enough which clients found hard to repay in time.