Name: Abreham Destaw

ID NO-R/4159/06

Title: analysis of credit provision and saving mobilization of Amhara credit and saving
institution(ACSI) (in case of Debre markose town Gozamin branch)

CHAPTER ONE

1.1. Back ground of the study

1.2 .Introductions

Poverty is a common problem of almost all developing countries. As a result their main and
immediate objective is to strive to break the vicious cycle of poverty and to reduce the
magnitude and extent of poverty. In this regard, the microfinance institutions recently gain
more and more acceptance. Currently, these institutions play a very vital role in global poverty
reduction debates microfinance could be a powerful strategy or instrument among several
others for alleviating poverty in Ethiopia.

Ethiopia is one of the poorest countries in the world characterized by low per capita income
and highest population pressure.

Ethiopia is one of the poorest countries in the world with per capital GDP of only $357(plummer
2012) and nearly 47% the rural populations are living below the poverty line compare to 33% in the
urban areas (RUFRP, 2001).

There is also a high level of unemployment even within skilled labor force. For instance,
according to 2004 World Bank development indicators, out of the total unemployment of the
active labor force 26.9%, 61.3% and 8.3% have complete primary, secondary and tertiary
education respectively and this unemployed population is increasing from time to time as the
population of the country is increasing.

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Hence as un intervention strategy the transitional and federal government of Ethiopia
implemented policy measure, such as the new extension program to increase food production and
alleviation of poverty intervention through delivering micro-finance services (credit provision
and saving mobilization).These services also considered as one of the policy households increase
their output and productivity, increase income, reduce poverty and attain food security. In 1980s
and 1990s several micro-finance institution are established as a weapon to resolve the above
problems or for alleviating poverty by providing financial services. Those micro-finance
institutions are Amhara credit and saving institution, Dedebit credit and saving institution, Omo
micro-finance institution, Addis credit and saving institution, Oromia credit and saving
institution etc…. (wolday amha,2003).

Amhara credit and saving institution (ACSI) is one among many micro-finance institutions and it
was established in october 1995 in accordance with licensing and supervision of micro –finance
institution.

Amhara credit and saving institution (ACSI) was initially established in October 1995 as a
department with the former Ethiopian relief organization (ERO) the current organization for
rehabilitation and development in Amhara (ORDA). It was licensed by the national bank of
Ethiopia as a credit and saving institution.

Amhara credit and saving institution aspires to see a society in which people of the region are
free from the grips of object poverty with all the power determining their future in their own
hands and ensure its institution sustainability (ACSI policy document) in the year of April
2005and also it aims to improve the economic situation of low income. Productive poor people
in the Amhara region through increased access to lending and saving committing itself to play a
key role in the improving the living standard of the population, even though the contribution of
the ACSI is large through the region. Some challenges are faced the institution like the lack of

 Skill
 Demand for non-traditional activities
 Infrastructure
 Trained man power

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The objective of these micro-finance institutions in Ethiopia is basically poverty alleviation
through the provision of sustainable financial services to the poor who actually don’t have access
to the financial services of other formal financial institution (yigirem k., 2000).

1.3 statement of the problem

In many of developing countries microfinance institutions are accepted rightfully as the most
important means in alleviating poverty and improving the standard of the poor. Micro- finance
institutions are mainly established to alleviate poverty by providing financial services such as
loans, saving and other services to the poor.

This study would help to examine the problem of credit and saving institution and their impact
on clients (in the case of Debremarkos town GOZAMIN BRANCH). Micro finance institutions
contribute its own in alleviating poverty. Howe ever this institution has faced various problem
while it serves the society like problem of using the borrower money for loan able activities that
means borrowers may use their loan for un intended purpose rather than using it for the right
purpose, problem of repayment of loan and under developed saving culture of the society,
shortage of capital to loan and shortage of trained employees.

Taking this into consideration to retrieve the study influenced to investigate some of the
problems of credit and saving institution impact on clients.

The research gap of this study was, based on my own knowledge until now there is no

Other study paper conducted on gozamin branch of ACSI.

1.4 Research Questions

This study tried to answer the following question.

1. What is the role of the institution in encouraging participation of the society in its
services?
2. How the institutions improve the living standards of the poor?
3. What are the challenges and limitations the institution would have faced?
4. Are evaluating credit worthiness of clients and collateral management are appropriate?

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 1.5 objective of the study

1.5.1 General objective:

This study has the general objective to analyze credit provision and saving mobilization of
Amhara credit and saving institution in DebreMarkose town in Gozamin branch.

1.5.2 Specific objectives:

1. To assess the institution role in encouraging society participation in its services.

2. To assess the contribution of institution in improving the living standards of the poor.
3. To identify the major challenges and limitation that micro-finance institutions is facing.
4. To examine whether the institution is following appropriate way to evaluate credit
worthiness and collateral management or not.

1.6 scope of the study (area of the study)

The study was mainly concerned on the geographic and conceptual scope of the study in Gozamin
branch, geographically in DebreMarkose town as well as conceptually to analysis the credit
provision and saving mobilization of Amhara credit and saving institutions. The time scope of this
study delimited from January up to May 2016 G.C

1.7 Significance of the study

The study would undertake to solve the problem of credit and saving institution on Amhara
micro-finance institution. It was also intended to study constraint and limitation of institution and
identify the area of improvement.

The finding of this study can be useful to help policy makers and micro-finance to make
decisions regarding the betterment of the rural working poor and their micro scale enterprise.

 Helps the micro finance institution to see their strength and their weakness.
 To correct or understand the problem of the institution face when they give credit
and saving services for their customers.

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  The finding of this study also use as reference for students and all those who
would like to pursue further investigation in the area.

1.8 limitation of the study

The research faced different limitations to complete this study. Some of them are:

 Unwillingness of the respondents to give full information.

 Lack of document materials.
 Lack of finance.
 Shortage of time to conduct the study.

1.9 Organization of the paper

The paper incorporates five chapters. The first chapter begins on the introduction of the whole
paper part, statement of the problem, research question, and objective of the study, the scope of
the study and significance of the study. The next chapter two is literature review of the study.
chapter three is research methodology and chapter four is data presentation, interpretation and
analysis. Then finally chapter five is conclusions and recommendation. At the end of the paper
there is appendix and references.

CHAPTER TWO

2. LITERATURE REVIEW

2.1 DEFINITION OF MICRO FINANCE

Theoretical review

2.1.1. Definition
Microfinance institutions are among the formal financial institutions targeting the poor both in
urban and rural areas and providing microfinance service (kebede et al. 2002). Microfinance is

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referred to as “a small scale financial service rendered to the rural and urban poor, provides
credit for self-employment and small business and includes saving and technical assistance”
(shete.1999).

2.2 Organization of micro finance institution

The majority of poor in developing countries are experienced with the vicious circle of poverty
and unable to accumulate substantial savings. This in fact calls for the need of external finance
to break away the circle.

Hence micro-credit and saving programs have been emerged us antipoverty instrument in
many low income countries. Making credit available and provision of saving services helps the
poor to accumulate capital and essential to alleviate poverty and promote economic
development.

This helps borrowers to smooth their consumption if they incur income losses due to
production failure (Sinha,1996. Khandker et al, 1995).

Banks in developing countries can serve only 20% of the population (Emerta, 2003). In addition
in the rural areas the interest rate charged by the informal lenders are high in habiting the
growth of small producers (khandker, 1995).

Micro finances arouse in the 1980’s as a response of doubts and research finding about state
delivery of subsidized credit to poor farmer.

In the 19070’s governmental agencies was predominant method of providing productive credit to
those with no previous access to credit facilities, people who had been forced to pay high interest
rates (Jonnahood, 1998)

As a result microfinance is introduced as a powerful development tool (Emerta, 2003).

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2.3 Role of micro finance in the economy

According to the World Bank book encyclopedia (1992, p1124) credit enables people to obtain
goods and services they don’t have enough money to for them right way. Several factors have
led increased interest in micro credit in promoting growth with greater equity. It also contributes
for the development of the country by empowering the people through increasing the access to
all factor of production.

2.4 Review of Ethiopian context

The 1999/2000 household income survey and expenditure survey and welfare monitoring survey
conducted by the central statistics authority (CSA) state that about 44.4% of the people of
Ethiopia lives below absolute poverty line. Poverty in the country the result of many complex
factors and intervention needed to reduce its diverse effect.

The delivery of financial service to poor is one important instrument in reducing poverty in
Ethiopia (woldiya, 2003). All micro finance institutions which are found in Ethiopia meet only
less than 9% of the demand for financial service of the active poor. This indicates there is
potential demand of micro finance in Ethiopia.

There are micro-finance institutions with more than 20000 clients with the objective effect of
delivering financial services to the entire region or expanding their geographical coverage in
order to make a meaningful impact on poverty alleviation efforts and transferring themselves in
to sustainable financial institution (wolday, 2003).

2.5 Regulatory frame work of micro-finance institutions in Ethiopia

Proclamation No_40/1996, which aims to provide for the license and supervision of the business
of micro finance institution by empowering the national bank of Ethiopia to license and
supervise them.

According to the proclamation any institution that needs to engage in micro finance activities
should fulfill the following:-

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  Obtain license from national bank.
 Formed as a company governed by commercial code of Ethiopia (CCOE)
 Deposit the minimum capital required i.e. 200000 birr or 240000 dollar in bank
(wolday,2003)

2.6 sustainability of the micro finance program

The benefit of the substantial micro finance is for the people who need the financial support. The
micro-finance program is a significant and growing industry, the institutions gives benefit to the
society, many can survive and manage their home well, send their children to school, eat three
times a day and can even save some amount of money for emergency cases.

Many MFIS in Ethiopia can deliver financial services in a sustainable way. Many can survive
and benefit from the program and be self-employed. The number of borrowers and size of the
institution are used to measure sustainability of the institution (little fiel, Murduch and hashemi,
2003).

According to wolday (2005, review of MFI in Ethiopia), the success of micro finance activities
in Ethiopia depends on good governance in improving the social performance. Most clients
‘income depends on agricultural products that affect the performance of the micro finance
institution because of the fluctuations of product prices that are difficult to predict. The
governance should ensure consistency between various aspects of its social activities by
analyzing the strength and weakness of institutions.

2.7. Interest rate for micro finance in Ethiopia

Interest rate collected by the institution may vary from different institutions. The nature of micro
–finance is small loans in such that interest rate needs to be high to return the cost of the loan.
According to directive No_MFI/12/98 micro-finance institution has the right to fix their leading
interest rate.

According to economic research paper by sunita (2003), in Ethiopia interest rate varies among
micro-finance institution ranging from 12.5% to 15%. Even if the institution in Ethiopia set their
own interest rate still difficult to cover operation cost because of low interest rate. However

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micro –finance in Ethiopia believes that increasing interest rate could hurt the poor and would
not be able to profitable to cover higher interest rate (wolday, 2005).

2.8 An overview of Amhara credit and saving institution (ACSI)

Amhara credit and saving institution (ACSI) was established in October, 1995. ACSI was
registered and obtained license from the national bank of Ethiopia which permitted it to operate
all over the northern nation and around DebreMarkos town and regional state (ACSI ,2001).as to
ACSI(2001),the lending activity are center on poor groups consisting of five to seven members
,individual and small business .

2.9 Empirical studies on micro –finance institution

In Ethiopia (Alemu,2006) reported positive impact of micro-finance on the poor in five different
zone of Amhara region. In particular, the result reported that micro-finance helped the poor to
smooth their income in the study area. the study also reported case of loan diversion. Some
clients were found to have their loans for unintended purposes.

Similarly,Asemelash (2003), also attest that loan provision to the poor by micro-finance had
positive impact on the poor. Specifically, the results showed that micro-finance lead to increased
income for the poor. Asides it helped to increase poor people access to better school and medical
facilities. Nur(2006),indicated that micro-finance beneficiaries have diversified income than the
beneficiaries . Furthermore, studies conducted on micro finance outreach, sustainability, loan
repayment performance areas shows that (Daba,2004), Asmelash ,(2001) ,Berhanu (1998), the
credit provided to the poor has brought a positive impact on the life of the clients as compared to
those who don’t get access to these micro –finance services .they showed that micro-finance has
brought a positive impact on income ,asset building and access to school and medical facilities of
the household in the study area

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CHAPTER THREE

3 RESEARCH METHODOLGIES

3.1 RESEARCH DESIGN

The method that employ for this study will be descriptive survey using primary and secondary
data sources.

3.1.1 Data types and sources

The study employed primary and secondary sources for the collection of data. The data would be
collect through questionnaires from sample respondents and by conducting interviews for them.
Manually the proposal depends on both qualitative and quantitative approaches.

3.1.2 Data collection methods

The data will collect through questionnaires and interviews.

3.1.2.1 Questionnaires

The data would be collected by means of self–administered questionnaires. the questionnaires

would be both close ended and open ended questions and also managed by both English and
Amharic languages.

These questionnaires would have distributed to selected clients (users) and officials. The
respondents would be asked to circle the choice that are provided under close ended questions
and give comments for open ended questions.

This tool was selected due to its easiness for distribution and collection. Therefore, the
questionnaires are used to relevant information in financial aspects such as credits provision,
saving mobilization, and the like information or data planned by the researcher to collect from
Gozamin micro- finance institution.

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3.1.2.2 Interview

Interview also prepared and administered to the officials, and employees. The interviews made in
depth insights concerning credit provision and saving mobilization on ACSI services.

The interviews would have more effective for its high response rate following questions and
verification of unclear issues.

3.2 Sample and sampling methods

The total population (users) of this study is consisting of 2765 users of borrowing services and
depositing service. Out this total population the study selected 64 users by using nonrandom
(convenient) sampling techniques. However, 4 respondents did not return the questionnaires. The
researcher selected samples conveniently in the time they came to the organization for getting
services. The study believed that this sample size does not represent the total population but
because of the time and cost I would select the sample size indicated above.

3.3 Data presentation, interpretation and analysis method

The qualitative and quantitative data which are collected through primary sources and secondary
sources were analyzed and presented by many analytical techniques like percentages, tables and
charts.

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Chapter four

4 Data presentation, interpretation and analysis

This part of the paper contains data presentation, interpretation and analysis using tables, figures
and percentages. The questionnaires were collected from 60 clients of the institution and 10
employees of the institution. The study also interviewed clients and employees of the institution.
The data which are collected through those two data collection methods (questionnaires and
interviews) are analyzed to conduct this study.

4.1 Demographic profile of sample respondents

4.1.1 Gender distribution of sample respondents

As can be seen below from tables 4.1 more than half of the clients 36(60%) are females and the
rest 24(40%) are males. But in contrast of clients, more than half of the officials are male 6(60%)
and the rest 4(40%) are females. From the following tables we can understand that the
participation of females in the services provided by the institution is high.

Table 4.1 gender of respondents

sex No _of Percent

Respondents
Clients Officials Clients Officials

Male 24 6 40 60

female 36 4 60 40

Total 60 10 100 100

Source: own sample survey,2016

4.1.2 Marital status of sample respondents

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 As shown below from table 4.2 from the total number of clients more than half of clients
respondents 33(55%) are married where as about 15(25%) of clients are divorced and 12 (20%)
are singles. When we see employees 4(40%) of respondents are single and also 4(40%) of them
are married and the rest of 2(20%) are divorced. This table indicates that more than half of
clients are married.

Table 4.2 marital status of respondents

Marital status No_ of Percent

Respondents
Clients Officials Clients Officials

Single 12 4 20% 40%

Married 33 4 55% 40%

Divorced 15 2 25% 20%

Total 60 10 100% 100%

Source: own sample survey, 2016

.1.3 Age distribution of sample respondents

Table 4.3 shows that most of the client’s respondent’s 25(41.67%) lies between 40-50 years.
Around 13 (21.67%) of the client’s respondents lies between 30-40 years and 10 (16.67%) of the
client respondents lies between 50-60 years. And also 8(13.3%) and 4(6.67%) of the respondents
are between the age of 20-30 and above 60 years respectively. On the other hand 5 (50%) of the
employee respondents lies between 30-40 years. Around 3(30%) of the employee respondents
lies between 20-30 years and the rest 2(2%) of them are aged between 40-50 years. Mainly in the
table below we can see that most of users of the institutions are between the age of 40-50 years.

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Table 4.3 age distribution of sample respondents

age No_ of respondents Percents

Clients Officials Clients Officials

20-30 8 3 13.3% 30%

30-40 13 5 21.67% 50%

40-50 25 2 41.67% 20%

50-60 10 - 16.67% -

Above 60 4 - 6.67% -

Total 60 10 100% 100%

Source: own sample survey, 2016

4.1.4 Educational background of sample respondents

According to table 4.4 below the largest proportion of client respondents are illiterate which
accounts 22(36.67%). Around 15(25%) of respondents are elementary level of students of grade
1-4, 11(18.33%) of client respondents also elementary level of students of grade 5-8. Whereas
6(10%) of respondents are high school of grade 9-10, 5(8.4%) of client’s respondents also
students of preparatory school grade 11-12 and the remaining 1(1.67%) are diploma holder.

On the other hand most of the respondents (employees) 8(80%) are diploma owner and the
remaining 2(20%) of employee respondents are degree holders. From the table below we can see
that most clients of the institution are illiterate and most of the employees of the organization are
diploma holders.

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 Table 4.4 Educational background of sample respondents

Educational level No_ of Percent

Respondents
Clients officials Clients Officials
Illiterate 22 - 36.67% -

1-4 15 - 25% -

5-8 11 - 18.3%3 -

9-10 6 - 10% -

11-12 5 - 8.4% -

diploma 1 7 1.6% 80%

degree - 2 - 20%

Master’s degree - - - -

total 60 10 100% 100%

Source: own sample survey, 2016

4.2 Analysis questionnaires and interviews

4.2.1 way of examining creditworthiness and collateral management

For the sustainability of the institution and in order to avoid credit (default) risk, proper
evaluation of the borrower is the basic concern that should be considered. The institution has its
own criteria used to select borrowers.

The institution also uses collateral before giving loans to clients. Gozamin micro-finance
institution mainly uses the group collateral (each member of the groups are accountable for
default by each member among them since they borrow in group). In addition to this property of
borrowers are also used as collateral by the institutions.

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 As per the interview from officials, the institution evaluates carefully the credit worthiness of
users and manages collateral in order to avoid credit risk. Clients use a group as collateral in
order to borrow money. Some of the clients respond that their property used as collateral for
them. The institutions uses different criteria to evaluate borrowers like he/she must be lived
above 2 years in his /her residents, his/her age is above 18 years, free from any addictive
behavior and zero source of income. The institution evaluated the borrowers by collaborating
with kebele management bodies as per the interviews from officials.

4.2.2 Role of the institution in encouraging society’s participations in its services.

According to the interview asked for manager and other employees, the institutions gives
training and create awareness about those services provided by the institutions. As they said that,
based on business development service the institutions gives awareness creation services in a
three months interval for 3-5 days.

The institutions provide many opportunities by considering its clients. Based on this, the society
can open a book account stating from 5 birr and they can deposit every time starting from birr 1.
In addition to this gozamine micro-finance institution sales mudaybank(Amharic word) for the
users in order to encouraged the saving culture of the society. But according to the interview
even if the organization provides such opportunities and services, saving culture of the society is
not that much developed (still undeveloped).

4.2.3 Role of the institution in improving the living standard of the society (clients).

4.2.3.1 Objective of the organizations

Since all organizations have its own objectives when it was initially established, gozamin micro-
finance institutions also have the objective of poverty alleviation. It provides credit and saving
services to the poor and improves the living standard of most clients.

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Figure 4.5 objective of the organization

figure 4.5 objective of the organizaion

poverty alleviation

both profit making and

poverty alleviation

Source: own sample survey, 2016

From the above figure, we can see that most of (70%)of employee respondents respond that the
main objective of the institution is poverty alleviation. The rest 30% of respondents said that,
institutions make profit by reducing poverty (both profit making and poverty alleviation are the
objective of the institution). The above chart shows that the main objective of the institution is
alleviation of poverty.

Table 4.6: institutions contribution in changing the living standard of the clients

Is there any change in your No_ of Percent’s

Living standard after you Respondents
Are being clients of the (clients)
Institution?
Yes 40 66.67

No 20 33.33

Total 60 100

Source: own sample survey, 2016

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 Table 4.6 shows that most of the respondents (66.67%) filled that there is change in their living
standard after they are being clients. According to them the institution helped them to fulfill their
basic needs and other extra requirements like television, water, electric power, teach their child.
But in contrast to this (33.33%) of clients respondents filled that the institution can’t change their
living standard. Generally the above table also shows that most of client’s living standards are
changed after they are being clients of the organization.

4.2.4 Challenges and problems that the institution is facing

As per the interview for officials, the institution faces some problems. They are repayment
problem (mostly depending on special situation), problem of using the borrowed money for the
intended purpose, under developed saving culture of the society. These are the major challenges
and problem faced by the institution while performing /providing services for the society.

4.2.4.1 Loan repayment problem

As per the interview from manager and clients, borrowers repaid their loan’s maturity date or
periodically in installment base. As he said that, “there are some situations where the customers
aren’t able to pay their loan at maturity date”. For example, if the repayment period of the loan is
mostly summer (for farmers specially), when the clients business face unexpected adverse
situation and also the repayment period and the clients profit generating period doesn’t match.

4.2.4.1.1 Loan repayment period

Loans are repaid at the end of loan term or on the installment base.

Table 4.7: loan repayment period

What is the loan No_ of Percent

repayment period? Respondents

Weekly - -

Biweekly - -

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Monthly 2 20
The whole amount at the 8 80
end of the loan term
Total 10 100

Source: primary data

According to table 4.7, 2(20%) of respondents filled that loans are repaid monthly and 8(80%)
of respondents answered that loans are repaid at the end of loan term. From this we can
understand that most clients are paid at the end of loan term.

The study also interviews some clients of the institution and they respond that when a certain
situation is happening they are not able to pay their loan at maturity date. For example, as one
respondent (farmer) told us if his agricultural products are adversely affected by climatic changes
like drought and other related causes he is not able to pay his loan. They also said that, if the loan
repayment period is not match with their profit generating period, their ability to repay the loan
is minimum.

As per the manager’s interview the institution take some remedies in this situation. In time of
facing the client’s business unexpected adverse situation, the organization give additional loan
for recoverment purpose. The clients pay its loan if he/she has another property.

4.2.4.1.2 Setting of loan term

Loan terms are set depending on the institution operational conformability or the borrowers’
request.

Table 4.8: the loan term set by the institution and requested by clients

Is the loan term set by the No _of respondents Percent

institution and the loan term the
borrowers request are
The same 2 20

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Nearly the same 4 40
Determined by the institution 4 40
depending on the operational
conformability
Total 10 100
Source: primary data

According to table 4.8, 2(20%) of respondents filled that the period of loan set by the institution
and request by the clients are the same. Around 4(40%) of respondents answered that the period
of loan terms are nearly the same asnd the rest 4(40%) respondents respond that the period of
loan are determined by the institution depending on the operational conformability as we see
from the above table the loan terms are determined by the institution depending on the
operational conformability and it is nearly the same with clients request.

Table 4.9 the effect of loan term mismatch on repayment loan

Do you believe un able to No_ of

match loan term with the respondents
demand of borrower affects the
re payment of the loan?
Yes 4 40%
No 6 60%
Total 10 100%
Source: primary data

As the table shows more half of the respondents 6(60%) do not agree with the effect of
mismatch of the loan term on re payment of the loan but 4(49%) of respondents agree that unable
to match loan term with the demand of borrowers affect the re payment of the loan. Majority of
the respondents filled that the mismatch of the loan term with demand of borrowers doesn’t
affect loan repayment. From this we can understand that loan repayment is not affected by
mismatch between loan term set by the institution and the loan term demanded by borrowers.

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Table 4.10 events where the institution ceased or reduced the loan

Is there any event where the No_ of Percent

institution ceased or reduced the respondents
loan in condition where there
are unexpected adverse
situations on the business of
borrowers?
Yes 0 0%
No 10 100%
Total 10 100%
Source primary data

In table 4.10, the entire respondent answered that; the institution can’t reduce the loan of the
borrowers where there is unexpected adverse situation on the business of borrowers. So from this
we can understand that if clients business is adversely affected by unexpected situation they can’t
repay their loan and this results repayment problem for the institution.

Table 4.11 loans which are paid before maturity date

Is there any occasion at No_ of Percent

which loans are paid Respondents
before due date?
Yes 8 80%
No 2 20%
Total 10 100%
Source: primary data

From the above table almost all of the respondents 8(80%) replied that there is occasion at
which loans are paid before due date or maturity date. As their response, the reasons for these
are, if the clients are profitable, if they have a capacity to pay and when clients are move to other
country etc. this table shows us even if there is repayment problem in the institution there was an
occasion in which loans are paid before maturity date.

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 4.2.4.2 Problem of using the borrowed money

As per manager’s response some of borrowers of the institution use the borrowed money for the
unintended purpose. He said that, for example one farmer borrows money for purchasing of ox
but he used for drinking and other unwanted activities.

Table 4.12: communication of clients with employees

Are there any employees from the No_ of Percent

institution who visit your business respondents
after you acquired the loan?
Yes 31 51.67
No 29 48.33
Total 60 100
Source: primary data

Table 4.12 indicated that more than half of client respondents 31(51.67%) replied that employees
of the institution visit the clients in order to see their business progress, how they use the
borrowed money as intended. In contrast to this 29(48.33%) of clients respond (answered) that
the employees of institution did not visit their business. So far we also interviewed the manager
of institution about the institution visiting culture of client’s business and how they control the
client’s usage of the borrowed money. As he told me “the institution gives training in 3 months
interval for clients”. And the above table shows that the employees are visit and communicate
with clients about their business progress, usage of borrowed money in some extent.

4.2.4.3 Saving culture of the society (clients)

As per interview from manager, underdeveloped saving culture of the society was one of the
majored problems faced by the institution.

Table 4.13 saving frequency of users

At what frequency do you No_ of Percent

come to save in to the Respondents
institution?
Weekly 1 1.67%

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Biweekly 2 3.33%
Monthly 49 81.67%
Other 8 13.33%
Total 60 100%
Source: primary data

Table 4.13 indicates that 1(1.67%) of client respondents saved in the institution in weekly
interval, 2(3.33%) answered that their saving frequency is two times a week. Most of the
respondents 49(81.67%) are saved in monthly interval as they implied. Whereas the rest
8(13.33%) of respondents filled that they came to the institution for saving other than the stated
time interval. From this we can understand that the saving cultures of the clients were not
attractive since they aren’t monthly employees.

Figure 4.14 saving purpose of clients

Series 1
35

30

25

20

15 Series 1

10

0
consumption investment social and entertainment others
religious affairs

Source: primary data

23
From the above figure most the client’s 33(55%) of respondents save for consumption purpose
and around 12(20%) of respondents on the other hand saved for investment purpose, 5(8.33%)of
respondents saved for social and religious affairs. Whereas 10(16.67%) of them are saved for
other purpose. From the above chart we can see that still the culture of the society was obsessed
for food.

As per the interview, even if the institution creating favorable condition for saving, the saving
culture of the society still needs improvement.

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Chapter five

5. Summary, conclusion and recommendation

5.1 summary of finding

It was found that more than half of the clients are females. This indicates that female’s
participation in the service provided by the institution is high. Most of the users of the institution
are illiterate and least of them were elementary and high school. Most of the employees are
diploma holders. It also found that more than half of the client is married and the age of most
clients’ lies between 40 – 50 years and most employees lies between 30-40 years.

The institution improves the living standard of most of the clients by providing different
financial services mostly saving and credits services. Gozamin micro-finance institution mainly
uses the group collateral means that each member of group responsible for each other. The
institution gives training and creates awareness about the service it provides. There is no any
event when the institution ceased or reduced the loan in condition where there is unexpected
adverse situation on the business of borrowers. There are loans which are paid before their
maturity date because of different reasons. But mostly loans are paid at the end of the loan term
and sometimes in monthly intervals. In some extent employees of the institution visit the client’s
business progress. Most of clients of the institution are saving for consumption purpose in
monthly time interval. The mismatch between loan term set by the institution and loan term
demanded by borrowers doesn’t affect the repayment problem.

There are some problems those face the institution when it provides services. Those are problems
of using the borrowed money for loanable activities, repayment problem due to factors like when
the client’s business adversely affected by climatic and other factors, underdeveloped saving
culture of the society.

5.2 conclusions

Micro-finance is a provision of financial services to low income clients (poor) including self-
employed and unemployed. The institution provides mainly credit and saving services. It

25
provides loans to the clients by using mainly group collateral. the institution improve the living
standards of mainly clients by alleviating poverty.

Females are the main participants in the services provided by the institution. There is no any
occasion in which the institution reduced ceased the loan when the borrower’s business is
affected by unexpected adverse situation. This results repayment problem.

The problem affected the performance of the institution is underdeveloped saving culture of the
society, repayment problem and problem of using the borrowed money for the right purpose.
Even if the institution gives training and creates awareness about those services it provided, it
isn’t accessible. Saving culture of the society is underdeveloped and mainly they save for
consumption purpose. The visit or communication between clients and employees are not
enough or accessible.

5.3 Recommendation

The study tries to forward some recommendable ideas for the problem observed during data
collection period in the operational procedures of the institution in the following few paragraphs.

- The recommendation begins with problem of using the borrowed money. The institution
tries to give some training to users about the usage of money and related matters. But still
there are problems; many borrowers don’t use their loan for right purpose. So it is
recommend that the institution should provide or give effective and accessible training
for all users and design tight control methods.

It is also better to, if the institution form special group of employees that visit the borrower’s
usage of money in a specified time interval. I also recommendthat; the institution can use the
group member as control mechanism. It means that one member controls the other member how
he/she uses his/her loan and if there is wrong usage of loan by an individual, the other member
report to employees of the institution then the employees take some remedies.

The research recommendthat the institution developed the saving culture of the society by
providing training that increases awareness about the importance of saving and also the
institution should give reward for those individuals (clients who can save better than other)
likewise if it is possible and can’t affect the profitability of the institution (can’t suffer for loss).

26
The research also recommends some ideas in order to reduce the problem repayment of the loan.
The research recommends that the institution should set the loan repayment period with the
income generating period of clients. For example, it is better, if the repayment period is in
autumnseason. This reduces the repayment problem because the clients have sufficient money to
repay their loans at the season.

It is also recommendable for the institution to match the period of loan which is requested by the
clients with the period of loan which is set by the institution. In addition to this the institution
should carefully evaluate the client’s background and risk associated with the client’s business
before giving the loan by coordinating with concerned bodies. If the client’s business is more
supposed to different natural and other hazards, it is better for the organization not to give loans.

BUDGET AND COST SCHEDULE

. Cost Budget

27
No Item Quantity Measurement unit

Unit Unit Total Cent

price birr

1 Paper 100 100 0.25 25 00

2 Pen 5 5 3.50 17 50

3 Ruler 1 1 3 3 00

4 Flash disk 4GB 1 130 130 00

5 Total material 175 50

cost

6 Printing cost 40 page 40 4 160 00

7 Transportation 150 00
cost

28
8 Miscellaneous 100 00
expense

Total 586 00

TIME SCHEDUAL
The following table shows the time plan through which the researcher will follow when doing
the research.

No Items Months of the year

Nov Dec Jan Feb Mar April May June

1 Title selection

2 Preparing
proposal

3 Reviewing
related literature

4 Data processing
and classification

29
5 Data analysis and
interpretation

6 Submission of
first draft

7 Submission of
second draft

8 Submission of
final draft

9 Presentation

REFERENCE

Alemu(2006), impact of micro-finance and entrepreneurship on poverty alleviation does national

cultural matter.

Asmelash B.(2003), the impact of micro finance in Ethiopia, the case of DECSI in Ganta
Afeshum woreda of eastern Tigray, MA thesis, AAU, Addis Ababa.

Berhanu, (1998), micro enterprise lending program and its contribution to income in urban
Ethiopia.

Daba,(2004) impact of micro-finance on poverty reduction in Ethiopia.

Girger and Goh,(2012) Ethiopia economic update: overcoming inflation, raising competitiveness.
The world bank working paper number 74385.

Joannahood,(1998) micro-finance and poverty alleviation: lessons from Indonesia’s village

banking system.

Mulat Demeke(2002), Ethiopian micro- finance association, A.A.

30
Nur,(2006), the role of micro-finance in strengthening pastoral household food security.

Robinson R,(2001)the micro-finance revolution and sustainable finance for the poor.

Shete, micro-finance literature review.

Sunita, p.(2003), economic research paper, factor impeding the poverty reduction capacity of
micro credit, field observation from Malawi and Ethiopia.

WoldayAmha,(2003), micro-finance in Ethiopia performance, chanenge and role in poverty

World bank,(2000), world development.

Yigrem,(2010), regulation and supervision of micro-finance business in Ethiopia, achievements,

challenges and prospects, Bangladesh, Dhaka

Zaid Wolday(2001), micro-finance revolutionary,policy and experience, Mekele university,

Ethiopia.

31
Questionnaires

These questionnaires are designed by Adama science and Technology University from economics
department. The main objective of the questionnaires is to assess the performance of ACSI and to
suggest solution to the problem.

Questionnaires designed and responded by officials and employees

Personal information

Sex male female

Age 20-30 30-40 40-50 50-60 above 60

Educational status diploma degree master degree

Marital status single married divorce

Responsibility in the institution ………………………………………………….

1. Is there any event where the institution reduced the loan in condition where there is
unexpected advice situation on the business of borrows? Yes No

2. Is the period of loan set by the institution and the period of loan the borrowers request are?
the same nearly the same determined by the institution depending on the
operational Conformability
3. Do you believe that unable to much the loan term with the demand of borrows affect the
repayment of loan? Yes No
4. What is the loan repayment period?

A. Monthly B. The whole amount at the end of loan term

C. both A and B

5. Is there any occasion at which loans are paid before due date or maturity date?
Yes No

6. If your answer for question 5 is yes what would be your reason?

………………………………………………………………….
7. What is the main objective of the organization?
A. Profit making B poverty alleviation C. Botha and B

Questionnaires

These questionnaires are designed by Adama science and Technology University from economics
department. The main objective of the questionnaires is to assess the performance of ASCSI and to
suggest solution to the problem.

32
Questionnaires designed to be responded by user/client

Gender of respondent’s male female

Age 20-30 30-40 40-50 50-60 above 60

Educational status illiterate 1-4 5-8 9-12

diploma degree

Marital status single married divorced widowed

Widower

Types of business carried on…………………………………………………………………

1. What was the collateral that you used to obtain the loan? ……………………………………………………….
2. Is there any employee from the institution that visits your business after you acquired the loan?
Yes no

3. Is there any change in your living standard after you being client of the institution?
Yes no

4. If answer in question 3 is yes in what manner explain? …………………………………………………………

……………...................................................................................

5. At what frequency do you come to save? Weekly monthly

biweekly other
6. For what purpose do you save? Consumption investment
social and religion affairs entertainment others
Thank you for your cooperation!

Interview for officials

1. What are the problems you are encountered while you provide service to the society?
2. Is your institution teach and create awareness to the society about the service you
provide?

3. What are the criteria to be considered from borrowers before lending?

4. Is there any occasion in which you face problem of repayment from clients?

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