Impact of Micro- Finance Service on Alleviation of Rural Poverty: Case Study on one Specialized Financial and Promotional Institution

Abstract

Poverty is a harsh and undesired phenomenon in mankind. Reducing, if possible eradicating poverty is unquestionable. Thus, microfinance programs have been considered as one of the main instruments in poverty reduction in recent development agenda. It is a means to support the marginalized active poor of the society. Studying the impact of microfinance intervention is important to assess its viability on poverty reduction. The main objective of this study was to assess the impact of microfinance services of MFIs in Ethiopia and the changes it has brought on the living standards of clients. It was focused on the impact of SFPI program at household and enterprise level. The study was conducted at the branches of the FSPI by employing the “before” and “after” method so as to evaluate the impact of the microfinance institution on reducing the poverty level of its clients. Primary data was collected using structured interview, FGD, and observational check-list while secondary data was obtained from the records, journals, proceedings, bulletins, internet and various books. Multistage sampling method was employed to take a sample of clients from the total. Both descriptive and inferential statistics such as mean, percentages, Wilcoxon signed rank rest and independent two sample t-test was employed. In general the credit scheme has increased the mean income of respondents and had improved the ownership of different productive assets, such as, oxen, cows and others. SFPI program has made a positive impact on households’ income, asset ownership, housing condition, expenditure, diet condition,’ access to education and medical facilities. SFPI credit delivery has also improved enterprises’ production capacity and employment opportunity of the local community. And there was no significant difference between the sexes regarding the socioeconomic variables except for saving and the level of income after loan. MFIs have significantly contributed towards improving the living standard of the poor and reduce poverty at household level. Therefore, strengthening the development of