Impact Assessment of Microfinance in Amhara Region of Ethiopia

1. Impact Assessment of Microfinance in Amhara Region of Ethiopia Getaneh Gobezie Amhara Credit & Saving Institution (ACSI) (getanehg2002@yahoo.com) “International Conference on Rural Finance Research: Moving Results into Policies” 19-21 March 2007 FAO Headquarters, Rome Italy

2. 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

3. 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

4. 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

5. Approaches…. “Quantitative” and “Qualitative” studies Quantitative (690 clients): • mature clients (>60 months) and new clients (<12 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)

6. Enterprisestability or growth Improvements in House-hold welfare Empowerment of Individual clients • increase in enterprise revenue; • increase in enterprise fixed assets, • increase emp’t. • improvements in transactional r/ships • increase in hh income; • diversification in sources of hh income; • increase in hh assets (housing, fixed assets, etc) • Increase ability to negotiate with others • Increase in control resources/income • increased self-esteem, respect • increase in personal savings • proactive behavior, confidnce about future • increased epend. on educ • Increase expend. on food, • an increase in HH effectiveness in coping with shocks.

7. 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

9. 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

10. 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 DOESN’T Translate into empowerment at community level

11. 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 don’t 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

12. Challenges for Microfinance Growth Client’s 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….)

13. Growth in Aerage Loan Size Br/yr (1998-2006) 1200 1000 800 600 400 200 0 1 2 3 4 5 6 7 8 9

14. 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)

18. Thank You