THE IMPACTS OF MICROCREDIT ON RURAL POOR HOUSEHOLD'S POVERTY REDUCTION: THE CASE OF GUMMER WOREDA, GURAGHE ZONE

Abstract

For the last four decades, the term “microfinance” has become mouth opener in the area of poverty reduction. 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 is to assess the impact of microfinance services in poverty reduction among poor households. Primary data were collected through close-ended structured questionnaire from active clients and incoming clients using random samples. Discussions with key informants and focus groups were administered to capture qualitative information. A total of 100 samples were selected using multistage simple random sampling. Among these samples all were interviewed. Settlement and gender composition were considered in sample selection process. Secondary data were gathered from different published and unpublished relevant materials. The study mainly applied analytical approaches such as frequencies, averages, and percentages The impact of delivering financial services to poor clients was analyzed based on some socioeconomic and political indicators in different levels. The findings revealed that microcredit provided by Omo Microfinance Institutions has helped the poor in many respects. The clients that are able to access to credit saving and capacity building of schemes of OMFI have shown increase in their household and personal income and assets. Moreover, it has a positive impact on personal savings and women’s empowerment. MFIs have contributed a great share in improving the living standard of the poor and reduce poverty at household level. Therefore, strengthening the development of MFIs in Ethiopia is an appropriate and appreciated policy instrument to realize the objectives of the Poverty Reduction Strategy of Ethiopia and make poverty history.