HAWASSA UNIVERSITY

A Research proposal on creating job opportunities

in micro finance institution in case of OMFI
Yirgalem twon

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 HAWASSA UNIVERSITY
AWADA BUSINESS AND ECONOMICS COLLEGE
DEPARTMENT OF MANAGEMENT
A RESEARCH PROPOSAL ON THE ROLE OF
MICROFINANCE INSTITUTIONS IN CREATING JOB
OPPORTUNITIES IN CASE OF OMO MICROFINANCE
IN YIGALEM TWON

PREPARED BY
Nattiani Negasa ID 1565/12
Advisor Name; Dawit

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September 2023
Yirgalem, Ethiopia

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 ABSTRACT
The research will conduct on the role of micro finance institution in creating
job opportunity, in a case study of Yirgalem town. The main purpose of the
study is to investigate major role of micro finance institution on creating job
opportunity. The researcher will be used primary data and secondary data to
complete the study effectively. For primary data a questionnaire is develop
based on the research problem identify and distribute to the target group of
the study. The secondary data also develop by using structure interview to
collect data from MFIS. Office manager of the study area. The target group of
the study is customers and managers of microfinance institution. The total
population of the study will 130 the researcher using simple random
sampling technique. It is easy to select among customers and managers to
distribute questionnaires and to collect the necessary data. The researcher
will take 45 employees and managers. Descriptive types of data analysis is
used to interprat data finance.

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 AKNOWLEDGMENTS

First of all I would like to praise the at mighty God for his entire gift and help
to reach this point of success. Secondly I would like to express my deepest
gratitude to my advisor Belay Dawit (MA) for his invaluable comment to
complete this research paper.

Last but not least I would like to thank all my friends who contribute a lot to
carry out this research paper.

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 Table Content

Contents Page
ABSTRACT.........................................................................................................i
Table Content..................................................................................................iii
CHAPTER ONE..................................................................................................1
1.1 Background of the study....................................................................................................................1
1.2. Back Ground of the Study.................................................................................................................2
1.3. Statements Of the Problem4…………………………………………………………………………………………………………2
1.4. Objectives of the study.....................................................................................................................4
1.4.1 General Objectives............................................................................................ 4
1.4.2 Specific Objectives of the study.........................................................................4
1.5. Significance of the study...................................................................................................................4
1.6 scope of the study............................................................................................................................5
1.7. Limitation of the Study.....................................................................................................................5
1.8. Organization of the paper.................................................................................................................6
CHAPTER TWO.................................................................................................7
2. LITERATURE REVIEW....................................................................................7
2.1 General overview of micro finance....................................................................................................7
2.2 Micro finance in Ethiopia...................................................................................................................9
2.3 Credit creates an employment opportunity......................................................................................9
2.4 Credit helps to raise productivity of net income..............................................................................10
2.5 saving in mobilization......................................................................................................................10
2.6 Providing new job............................................................................................................................10
2.7 Role of micro finance in economic development............................................................................10
2.8 Financial needs and financial services.............................................................................................11
2.9 The difference between micro finance and micro credit.................................................................11
2.10 The clients of Micro finance...........................................................................................................12
2.11 services for micro entrepreneurs...................................................................................................12
2.12 Benefits of saving facilities for the poor........................................................................................13
2.13 Borrowers use micro credit loons..................................................................................................13
2.14 Kinds of Institution deliver micro finance......................................................................................13

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 2.15 Micro finance help the poor..........................................................................................................13
2.16 An equal employment opportunity policy.....................................................................................14
CHAPTER 3.....................................................................................................15
3. RESEARCH METHODOLOGY.......................................................................15
3.1 RESEARCH TYPE...............................................................................................................................15
3.2 Types of data...................................................................................................................................15
3.3 Source of data..................................................................................................................................15
3.4 Methods of data collection..............................................................................................................15
3.5 Target population............................................................................................................................15
3.6 Sampling technique.........................................................................................................................16
3.7 Samples Size....................................................................................................................................16
3.8 Data Analysis and presentation.......................................................................................................16
CHAPTER FOUR..............................................................................................17
4.1 Time and Budget Scheldule……………………………………………………………………………………………………………..17
4.2 Budge tschedule…………………………………………………………………………………………………………………………18
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 CHAPTER ONE

INTRODUCTION
1.1 Background of the study
Micro finance institutions are the main way of life for majority of developing
countries like Asia, Africa and Latin America in case of Africa as it is under
developed and highly affected by population growth beyond their economy
and population growth are not balanced with economic growth. In order to
reduce such problem under developed countries should be introduce the
expansion of micro finance institution sector in their economy. When micro
finance institution sector expanded (parallel)to economy growth there is high
opportunity of employment creation (yunus 2003)

In addition microfinance institution is a financial institution that provides

services for poor and low income clients. In other words micro finance
institution is the provision of small loans to poor people to help them engage
in productive activities or grow very smoll business (Mhammedyunus 1993).

When come to the realty in Ethiopia like other sub-Saharan African countries
the socio economic. Situation of Ethiopia is characterized by low growth of
income. Some of the problems are social services high population growth,
economic in efficiency on high un employment etc. micro finance is relatively
new industry which arose in the early 1980, after the faller of the
government delivery at subsidized credit to poor people micro finance there
come in as a beginning of seeking effective market orient solutions to the
provisions of sustainable and effective financial resources for poor groups of
people who do not have access to financial services from formal government
and private institution (woldayAmha 2002).

In addition micro finance institutions provide services. To those who could

not be served by formal bunks is found to play a prominent role and also
micro finance institutions play great role in creating job opportunity for un

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employed peoples and also an efficient micro finance program could reduce
the rate of un employment.

1.2. Back Ground of the Study

Omo micro finance institution established in legal registered by the national
bank of Ethiopia, according to Ethiopia and proclamation NO 40/1996.. based
on commercial code of Ethiopia and proclamation No.40/1996 Omo Micro
finance five (5) total number of clients 7119 out of which 2098 which 2098
are an and 5021 rural clients.

Objectives

- To improve the social condition of the people

- To provide sustainable development finance to low income people.

- To encourage and promote the saving habit of individuals

Vision

They spire to be a financially self-sustaining model microfinance institution

enhancing mainly (level hood of low in employee

Mission

To provide need based financial service to strengthen the economic base of

the low income rural and urban people through increased access to
sustainable and cost efficient financial service.

1.3. Statements Of the Problem

The expansion of microfinance institution has capacity to enable the
employments to have their own source of income and get relief from
dependents. Self-employment can be also anentrepreneur (Batra 2003).

In addition to reduction of unemployment and income generation

microfinance institution also serve as an input towards sustainable industrial
growth to create job opportunity and decrease unemployment.(Mohamed
Yunus,1991)

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The expansion of micro finance institution is unquestionable measure those
microfinance institutional are stepping stone for economic growth and
development as it provide the provision of loans to small scale business as
well as for poor clients to help them engaging in productive activities (Bhtia
2004).

Omo microfinance institution is one of financial institution which provides

financial service of loan and saving to poor people both in urban and ruler
areas.

In addition the institution is participating in the straggle of unemployment

redaction by creating job opportunity in Yirgalem town assumed to enable
the client to develop their saving culture to participate in economic activities
and enhance level of income .(www.life in Etiopia.com/micro finance)

The researchers will explain specifically about how unemployment rate is the
serious problem of society by creating job opportunity for the society in the
study area.

The researcher is motivate to do research study on role of micro finance

institution; because of that this sector have great role in redaction of
unemployment by creating job opportunity in the study area. So this
research also help the society of Yirgalem town by motivating them in order
to engaging them in sector.

According to researcher idea there is no any research doing in Yirgalem town

on the role of micro finance institution in creating job opportunity .So this
research will help the society of study area By motivating them in doing in
these sector and by creating awareness in the society in regarding to this
sector.

Based on the purpose the researcher try to answer the following questions:

 What are the main functions of Omo micro finance in creating job
opportunity?

 How far Omo microfinance institution minimizes unemployment?

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 What is the target customer of micro finance institution?

 How microfinance institutions are the basic for sustainable economic

growth?

 How microfinance institutions helping businesses owner to have their own

source of income?

1.4. Objectives of the study

The researcher aim to attain the following general and specific objectives.

1.4.1 General Objectives

The main objectives of the study to analyze the role of micro finance
institutions in creating job opportunity in Yirgalem .

1.4.2 Specific Objectives of the study

The specific objectives of the study are:

To access the main function of Omo microfinance institutions in creating job

opportunity.

To investigate to what extent Omo microfinance institution minimizes

unemployment.

To understand the target customer of microfinance institutions.

To analyze how microfinance institutions are the basic for sustainable

economic growth

To examine microfinance institution in helping business owner to have their

own source of income

1.5. Significance of the study

As our country is one of the least Developed and have rapid growth of people
with increase in the rate of unemployment. this study will shows the
potential of microfinance institution to reduce the unemployment and its
problem by creating job opportunity.

After completion of the study the researcher wishes that the study will an
essence for investigation on the role of microfinance institution and related
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idea of it in order to extend its service of creating job opportunity for people
with problem of unemployment.

Additionally the study will has the following advantages

For the researcher:-To change theoretical knowledge i.e. organizational

behavior, research methodologies, and human resource management into
practical. To acquire B.A degree in management and increase the habit of
conducting for true researchers.

For the organization: - the study help the sector to know whether it is
managing in expansion of the microfinance institution effectively as possible.

 For other researcher:- it is helpful for other researcher as a

reference while conducting a research.

 It serves as guide line for researcher how to do research.

1.6 scope of the study

Due to time, research constraint and farthesness of the researcher

residence. the study will focus only on the role of micro finance institution
specifically Omo micro finance that working Yirgalemtown.

The study area found in Sidama regional state at Dale woreda.

There for the study will focus on cooperative business, which will have
engaging in micro and small enterprises to assess the roll of micro finance
institution in creating job opportunity.

1.7. Limitation of the Study

The researcher try to work on the role of microfinance institution in creating
job opportunity in Yirgalem town Omo Micro finance, but during the
investigation there are some limitations. These are:-

- lack of adequate source of data (reference)

- Lack of experience for the researcher

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1.8. Organization of the paper
This study going to provide inherent and ordered flow of procedures to
problem of findings. Accordingly, the researcher organized in to five
chapters. The first chapter will about introduction part of paper which
comprises the back ground of the study, back ground of the organization,
statement of the problem, researcher equation and objective of the study
sentience of the study and the scope of the study, Limitation of the study
and organization paper

The second chapter will introduce the review of the related literature. In third
chapter the researcher methodology will studied. In the fourth chapter the
researcher will analysis and interpret paper finally, in the fifth chapter
conclusion and recommendation will the final task of the researcher

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 CHAPTER TWO

LITERATURE REVIEW
2.1 General overview of micro finance.
What is micro finance?

Micro finance is often defined as a financial services for poor and low income
clients altered by different types of service providers. In practice the term is
often used more narrowly to refer to loans and other services from providers
that identify themselves as “ micro finance institutions” (MFIS).

This institution commonly tend to use new methods developed over the last
30 years to deliver very small loans to un salaried borrowers, taking little or
no collateral.

This method include group lending and liability, pre-loan savings

requirements, gradually increasing loan size, and an implicit guaranteed
ready access to future loans if present loans are repaid fully and promptly.
More broadly micro finance refers to a movement that envision the world in
which low income households have a permanent access to arrange of retail
providers to finance income –producing activities, build assets, stabilize
consumption and protect against risks.

These services include saving, credit, insurance, remittance, and payments,

and others (jhon son, 2003).

Micro finance is based on the promise that the poor have skill witch remains
unutilized.

It creates dependency and takes away the individuals institute to break

through the wall of poverty. Creativity in each human being is to anser to
poverty.

Micro created belongs to the group of financial service innovation under the
term micro finance.

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Other service to micro finance is a micro saving, money transfer and micro
insurance micro credit is innovation for developing countries. Micro credit is
a service for poor people that are un employed entrepreneur or farmers who
are not bank able by helping people with micro credit it give them more
available or sustain in an income and often began to build up wealth and
exist poverty (yunus, 2003)

Microfinance is usually understood to entail the provision of financial services

to micro entrepreneurs and small businesses which lack access to banking
and related service due to the high transaction costs associated with serving
these client categories.

The two main mechanisms for delivery of financial services such clients are
relationship based banking for individual entrepreneurs and small businesses
and group based models where several entrepreneurs come together to
apply for loans and other services as a group.

 In some regions, for example Sothern Africa micro finance is used to

describe the supply of financial services to low in come employees, which
is closer to the retail finance model prevalent in mainstream banking .

 Micro finance is abroad category of services, which includes micro credit.

Micro credit is provision of services to poor clients. Micro credit is one of
the aspects of micro finance, conflation of the two terms is endemic in
public is course.

 Due to the brood range of micro finance services it is difficult to assess

impact, and very few studies have tried to assess its full impact.
Proponents often claim that micro finance lifts people out of poverty but
the evidence is mixed.

 What it does do, however is to enhance financial inclusion. (Johanson

2003)

2.2 Micro finance in Ethiopia

Ethiopia is one of the sub Saharan countries which poverty is relatively
evenly distributed compared to other sub Saharan African countries.
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The cause of wide deep rooted poverty includes natural disasters, shortage
of access to infrastructure and resources. It also argued that poor access to
financial service is among root cause of poverty in Ethiopia. Millions of
people in Ethiopia suffer from lack of saving and credit service. (Horuvey,
2002)

The governmental organization known as association of Ethiopia in micro

financial institution (AEMSE) was established on June 1999 by obtaining a
license from the ministry of justice of federal government of Ethiopia. The
aim of AEMFI is to see are educed level of poverty and increase level of
consumption and ultimately wealth capital creation in Ethiopia through un
active intervention of current and future micro finance institution growing in
to different and substantial rural bunk and micro finance bank.

AEMFI is committed to be support MFIs that can reach millions of poor

Ethiopia that can play active role as financial intermediaries and institutional
investors (OCSSCO. 2007).

2.3 Credit creates an employment opportunity

The poor need assistance in accessing the resources required to develop
there activity.

According to khandker, (1998) lack of saving and capital makes it difficult for
many poor people who went jobs in the farm and non farm sector to become
self-employed and to undertake productive income generating activities.

As world banks study has indicated that the number of poor people in sub
Saharan Africa has increased significantly.

The largest segment of this population is un employed or self-employed.

In such situation, credit provides and substantial employment opportunities

at all level of skill through establishment of income Generating activates
(EBR. 1993)

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2.4 Credit helps to raise productivity of net income
Credit has a great potential to re movement of the associated constraints
faced by the poor.

To majority of population in this sector needs credit either for starting up

small business or for the expansion of the existing.

They must proceed to accumulate before they purchase material in puts for
their business (Mohammed Yunus. 1991)

2.5 saving in mobilization

Saving service not only provide valuable finance as assistance to low in
come clients but also strengthen institutional self-efficiency member ship
commitment to micro financial initiative and build a service discipline, self-
esteem and wellbeing. Sawing mobilization in Ethiopia is becoming integral
part of available micro credit delivered system such that the link between
saving and credit prompted food production and foods security (Horvey,
2002).

2.6 Providing new job

As population and economy grow smalls scale micro enterprise (SME),
provides new job opportunities.

They use more unskilled labor force than the large ones. If they dispersed in
rural areas, they help to reduce the flow of un employed people from the
rural areas to urban centers. They are the center of initiative and source of
innovation to improve the countries productivity (Hailey, 2003).

2.7 Role of micro finance in economic development

As credit plays a vital role in beginning and expanding the business, micro
finance has been treated as an important tool for economic development.

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Micro finance plays a vital role in economic development though the
following ways.

Job creation: a business that start and operates because of micro finance did
can create job in equal number as those created by multinational
corporations.

Financial stability: one of the greatest role micro finance has played by
providing financial stability to people which contributed to a local economics
in substantial extent.

Global poverty: the supporters of micro finance believe that offering financial
stability to poor and low income financial through small loans may break the
poverty cycle for future generation. (woldayAmha. 2002).

2.8 Financial needs and financial services

In developing economies and particularly in the rural areas many activities
that would be classified in the developed world as financial are not
monetized; that is money is not used to carry them out. Almost by definition
poor people have very little money. But circumstances often arise in their
lives in which they need money or the tings money can buy.

In start rather fords recent book. The poor and their money hesitate several
types of needs life cycle need such as weddings, funerals, child birth,
education, home building widow hood, old age, (woldayAmha. 2002).

2.9 The difference between micro finance and micro credit.

Micro credit refers to very small loans for unsalaried borrowers with little or
no collateral, provided by legally registered institutions currently; consumer
credit provided to salaried workers based on automated credit scoring is
usually not included in the definition of micro credit, although this may
change.

Micro finance typically refers to arrange of financial services including credit,

savings, insurance, money transfers, and other financial products provided
by different service providers targeted at poor and low income people. Micro
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credit different from other targeted development ending in addition to the
new techniques explained in the micro credits approach has tried to avoid
the pit fall of an earlier generation of targeted development landing. The
approach focus on fostering batter repayment discipline and changing in to
rest rates that cover the cost of credit delivery, both of which support
development of sustainable institutions that can continue to expand their
services in the future (Batre B.s and batra , 2004).

2.10 The clients of Micro finance

The typical micro finance clients are low –income person that do not have
access to formal financial institutions micro finance clients are typically self-
employed after house hold based entrepreneurs. In rural areas, they are
usually small farmers and others who are engaged in small income
generating activates such as food processing and petty trade. In urban areas
micro finance activities are more divers and include shopkeepers, service
providers artisans street vendors etc, micro finance clients are poor and
vulnerable non poor use have relatively stable source of income (ckeark,
2003)

2.11 services for micro entrepreneurs

Leaving poverty does not depend on repaying one’s loans leaving poverty
depends on creating a successful business. Yet to a few my focus on helping
their clients use their loans to create successful business some that shifted
to client centered approach appear to have had more success.

Beyond financial services most MTIS other basic loan to repayment training.
Generally the training is limited to emphasizing the importance of repaying
the loan and of applying the loan to the business rather than spending it on
personal needs. Yet clients often race health emergencies and family crises

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and also went to spend some of the loan proceed on education. (Dr, baily
gebretisay 2003).

2.12 Benefits of saving facilities for the poor

The clients perfective saving such as credit facilities are important tools for
efficient liquidity management. Virtually all people will save in any given
time and face a portfolio decision with regard to different savings options.
The advantage that deposit facilities show over informal savings is a good
mix of accessibility to cash security land rate of return and divisibility of
savings. In kind saving such as gold, Jewelry or live stack requires time to be
converted in to cash. (GebreHiwotAgeba, 2006)

2.13 Borrowers use micro credit loons

Many credit borrowers have micro enterprises un salaried in formal in come
Generating activities. However, micro loans may not pre dominantly be used
to start or finance micro enter prices. Scattered research suggests that only
half or less of loan proceeds are used for business purposes. The remainder
supports a wide range of house hold cash management needs, including
stabilizing consumption and spreading out large, comply cash needs like
education fees, medical expenses or life cycle events such as wedding, and
funerals (Jhon son, 2003).

2.14 Kinds of Institution deliver micro finance

Most of MFIs started as not for profit cooperatives, and state owned
development and postal savings banks. an increasing number of MFI are now
organized as for profit entities often because it is a requirement to obtaining
a license from banking financial institutions (NBFI) commercial banks that
specialize in micro finance or micro departments of full-service bank. Some
micro finance institutions provide non-financial products such as business
development for health services (Johunson, 2005)

2.15 Micro finance help the poor

The impact of micro credit has been studied more than the impact of other
forms of micro finance micro credit can provide arrange of benefits that poor
households highly value including long term increases in income and

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consumption. Harsh aspect of poverty is that income is often irregular and
un predictable. Access to the credit help the poor to smooth cash flows and
avoid periods were access to food, clothing shelter or education is last.
Credit can manage it easier to manage shocks like sickness a few age
earner, theft or natural disasters.

The poor use credit to build up assets such as buying land, which gives them
future security. Women participate in the micro credit programs often
experience important self-empowerment. (Johnsan, 2003)

2.16 An equal employment opportunity policy

An equal employment opportunity policy is a commitment to engage in
employment practices and procedures’ which do not discriminate and
provide equality between individuals of different groups or sex to achieve
full, productive and freely chosen employment (ILo, 1996)

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 CHAPTER 3

3. RESEARCH METHODOLOGY
3.1 Research Type
The researcher will use descriptive type of research and begins with well-defined
subject and conduct research to describe it accurately.

The outcome is detail picture of the subject because this type of research uses to
identify and obtain current information on the particular area.

3.2 Types of data

The researcher use both primary and secondary data to conduct the study. Because
primary data is includes interview and questionnaires and secondary data contains
manuals. Document and written materials of organization which provides the
researcher full information.

3.3 Source of data

The researcher will uses Primary source includes interview and questionnaires from
the employees and managers of Omo micro finance institution and Secondary
source is manuals, document, recorded and written materials of the organizations.

3.4 Methods of data collection

The data collection instrument that the researcher will use for primary data is
questioners and interview. Questioners are distribute for simple respondent in
order to acquire adequate and necessary data for the study. Interviews will prepare
for the manager of Omo micro finance of Yirgaalem town to get detailed
information. On the other hand the data collection tools for collecting secondary
data is document review mantas, any records and written materials of the
organizations.

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3.5 Target population
The target population of the study focus on employee and managers of “Omo
macro finance institution” in which there are two (2) managers and one hundred
twenty eight (128) employees which is totally 130 in numbers.

3.6 Sampling technique

Since the study focuses on particular organization the researcher will use the
probability sampling technique, under probability, simple random slumping is use.
Because of each member of employees within study has equal chance of being
selected. The method involves selecting at random from all list of population.

3.7 Samples Size

It is known that much information will obtain from huge number of respondents. But
because of shortage of time and budget the researcher will select only few
respondents from the total population by using the following formula.

n = z2 (Pq)N where e = 0.1

e2 (n-1) + z2 (pq) z= 1.64

n= (1.64) 2 (0.5) . (0.5) 130 q = 0.5

(1.1) 2 (130-1) +(1.64)2 (0.5*0.5) p = 0.5

N= 45 N= 130

3.8 Data Analysis and presentation.

Attar collecting data from different sources, the researcher will plan to analyze data
by using disruptive data analysis that encompasses qualitative and quantitative,
percentage, tabulation and statements.

The respondents are categorized based on age sex and related personal data.

Finally, the data will analysis by considering each questionnaires and interview
separately.

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 CHAPTER FOUR
TIME AND BUDGET SCHEDULE
4.1 Time schedule
It describe the plan of assessing the ongoing progress toward achieving the research
objectives. It specifies how each project activity is to be measured in terms of completion, the
time line for it completion. In order to perform may task in timely manner and monitor any
project progress and to provide timely feedback for any research modification or adjustment I
provide the following time plan.

No Activities Dec Jan Feb Mar Apr Jun July

1 Title **
selection

2 Literature **
review

3 Preparation **
of proposal

4 Collection of **
used
material

5 Data **
collection

6 Data **
analyzed
and
processing

7 Report **
writing

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8 Submission **
of report

9 Presentation **
of report

4.2 COST BUDGET

This shows how much it will cost to conduct research .I state cost of every budget items that
should be quantitatively shown ,my proposal cost budget reflects costs such as ; personal
consumable supplies ,travel, Communication, publication, and so on.

No Items Quantity Per unit cost Total cost

1 Paper 1 packet 2 ETB 200

2 Pen 12 10 120

3 Bindings 1 10 10

4 Transport 150

5 Internet 5hr 10 25

6 Typing 50pages 10 500

7 Printing 50 pages 2 100

8 Miscellaneous 450 600

expense

Total 1705

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Bibliography

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management,3rd edition deep publication ptu, litd, new delhsindia.

2. Jhonson (2003) “ Business and management research methodlogies”

3. Cleark (2003) “ Business and management research methodologies.”

4. Central statistical authority economic report (1997)

5. Gebrehowotageba, (2006)” micro and smolls enterprises (MEX) in ehtiopia

empirical euidence”.

6. Dr.hailygebretisay, (2003) eritarepreneurship and smoll business

management.

7. Mohammed yunus. (1991) faces of poucrty 3 rd edition. JDR/ mon:

bangladish.

8. Woldayamha. (2002) microfinance in Ethiopia, performance, chalienges

and role on poverty reduction:4th edition addisAbaba , Ethiopia.

9. World bunk (1993): definition of small and micro enterprise: Geneva

swizerland.

10.Horveys, Rosen. (2005). Public finance: 7 th edition: mc GrawHiu:America,

New York.

11.Michacl p: todaro (2002), economic development.

(WWW.life in Ethiopia com/micro financé)

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