2.6 .

Impact of Microfinance in Ethiopia

 In Ethiopia some case studies of microfinance show positive impact.
 The study of Meehan (2001) ,he case study of Desk, reveals that over
credit provision significantly impacts household income, increasing
agricultural production, land ownership, and trading activities, particularly
in draught oxen farming and land rental.
 Meehan highlighted that female clients were able to engage in trading
activities previously unattainable due to lack of capital.
 The credit input's increased income positively impacted household food
supply, children's education, and basic necessities like clothing.
 Meehan's positive experiences depend on financial services like ASCI,
which have increased income, improved food security, and improved
access to education and healthcare in rural areas. 1
 Cont’d
 Tadesse (2001), indicated that since the launching of micro program some
authors found encouraging results regarding:
 increasing number of beneficiaries of the program,
 employment creation and income generations
 food allocation to each of beneficiaries
 J. Lidger wood (2000), stated that the effect of micro financing scheme
under the micro enterprise project in southern Ethiopia has shown
improvement on areas of:
 Educations and family assistance
 Consumption and medical expenditures
 employment creation
 income generation and savings. 2
 2.7. Major problems observed
In different Countries
 The major challenges of microfinance institution performance
throughout the world includes:
 Microfinance institutions target populations with limited
business opportunities due to market inaccessibility,
imputed demand, and insufficient product credit, requiring
additional inputs.
 Many microfinance institutions never reach the minimal
scale or the efficiency necessary to cover costs.
 The micro credit schemes in the country have limited
linkages with formal financial institutions, primarily
focusing on depository services. 3
 Cont’d
 Lack of assessment of the profitability of micro enterprises
financed.
 The microfinance does not provide flexible and responsive
financial services to clients.
 Very limited capacity of the microfinance institution interms
of trained man power, equipment, transport facilities,
offices, management information system, and poor
infrastructure and governance problems.
 The microfinance institutions have excluded the poorest of
poor.
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 2.8. Microfinance Institution Laws

 Ethiopia is one of the few countries with a clear microfinance law.

 Proclamations number 40/1996, which aims to provide for the
licensing and supervision of the business of micro financing clearly
indicates the requirements for licensing micro financing institutions
by empowering the NBE to license and supervise them and to this
end issue relevant directives.
 The objectives of the proclamations were to provide a legal fame
work that brings the activities of microfinance institution within
Ethiopians monitory and financial policies and to provide a legal
frame work for the promotion of microfinance institution.
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 Cont’d
 According to proclamations, any institution that needs to engage in
microfinance activities should fulfil the following.
 Obtain license from the NBE
 Be formed as company
 Deposit the minimum capital required by the NBE
200,000 birr.
 The directors and other officers of the micro
financing institutions meet the requirements per by
the NBE.
 The national bank of Ethiopia has issued if directives, which have
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been consistent with proclamation no. 40(1996.
Next presenter will be
Talile Kabite

Thank you for the kind

attention!
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