A Review of Ethiopian Microfinance Institutions and their Role in Poverty Reduction: A Case Study on Amhara Credit and Saving Institution (ACSI)

This case study analyzes the role of MFIs in poverty eradication in Ethiopia, with specific reference to Amhara Credit and Saving Institution (ACSI).

Ethiopia is one of the poorest countries in the world. Microfinance started in Ethiopia 1994-95, but has not been able to meet demand. ACSI aims to meet the need of small-scale borrowers in income generation schemes. Study findings indicate that people are unaware of the potential of microfinance. The paper recommends that MFIs:

• Open branches in rural areas where people need money;
• Respond to poor people’s needs by developing loan plans that have flexible repayment periods and frequencies;
• Move away from group methodology into village banking and individual lending;
• Develop savings services and skill development programs;
• Introduce poor people to non-traditional activities that can get them better returns;
• Give priority to women in self-help groups and encourage them to participate in policy-related decisions.

The paper recommends that the government collaborate with MFIs in their poverty reduction efforts, promote MFIs that are socially responsible and work with MFIs to provide training to women entrepreneurs.