Successes in Expanding Microfinance Opportunities in Rural Ethiopia - Where There is Little Entrepreneurship?

This paper examines microfinance operations in Ethiopia, focusing on the challenges that expansion of microfinance services faces.The paper states that:

• Microfinance service has expanded over the last one decade in Ethiopia;
• Organizations like the Amhara Credit & Saving Institution (ACSI) have used the Group Guarantee Lending Model (GGLM);
• Institutional efforts are underway in the following manners to adapt this model to the local socioeconomic situation where agriculture is the dominant activity:
  • Adjusting the size and functions of the group;
  • Using endogenous community knowledge for client screening and follow-up;
  • De-linking repayment schedules from the actual cash flow of the agricultural activity for which the loan is taken;
  • Offering saving mechanisms to clients that provide ‘self-insurance and help smooth income flows from seasonal and risk-prone agricultural activities.
• There exist challenges to enhancing the efficacy and impact of the services in terms of lack of technology, business development services (BDS), marketing, infrastructure and entrepreneurship.
• The generous relief and safety-net supply has is also an impediment for microenterprise growth and a challenge for national development at large.

The paper concludes that although microfinance is the key to poverty alleviation and microenterprise development, there is a need for:

• Progress in the areas of enterprise development, agricultural technology, BDS, marketing, rural infrastructure, etc;
• A collaborative effort to remove all challenges facing the industry, thus aiding the growth of microfinance and national development.