Paper After Defence

Ethiopian Civil Service University Institute of Urban Development Studies
INSTITUTE OF URBAN DEVELOPMENT STUDIES
DEPARTMENT OF URBAN MANAGEMENT MASTERS

PROGRAM
ASSESSING THE ROLE OF MICROFINANCE INSTITUTIONS IN PROMOTING

THE SOCIOECONOMIC CONDITION OF BENEFICIARIES:THE CASE OF ADDIS
CREDIT AND SAVING INSTITUTION SHARE COMPANY IN GULELE SUB CITY
BY:
MULUGETA TAYE
February, 2016
Addis Ababa, Ethiopia

ETHIOPIAN CIVIL SERVICE UNIVERSITY
Institute of Urban Development Studies

Urban Management Department
ASSESSING THE ROLE OF MICROFINANCE INSTITUTIONS IN PROMOTING THE SOCIOECONOMIC

CONDITION OF BENEFICIARIES:THE CASE OF ADDIS CREDIT AND SAVING INSTITUTION SHARE
COMPANY IN GULELE SUB CITY.
BY:
MULUGETA TAYE
ID UMMR-O139/06
Advisor:
BELETE EJEGU (PhD Candidate)
A Thesis Submitted to the Urban Management, Masters Program,

Ethiopian Civil Service University, in Partial Fulfillment of the
Requirements for the Award of a Masters Degree in Urban
Management
February , 2016
Addis Ababa, Ethiopia

Declarations
I Mulugeta Taye, I.D. Number UMM-0139-06, do hereby declare that this is my

original work and that it has not been submitted partially; or in full, by any other
person for an award of a degree in any other university/institution.
Name of participant__________________ Signature___________ Date__________
This Thesis has been submitted for examination with my approval as University advisor.
Name of Advisor___________________ Signature_____________ Date________

Approval
The undersigned certify that have read and hereby recommend to the Ethiopian Civil
Service University to accept the Thesis submitted by Mulugeta Taye, and entitled
“Assessing the Role of Microfinance Institutions in Promoting the Socio-economic
Condition of Beneficiaries: the Case of Addis Credit And Saving Institution Share
Company in Gulele Sub City.” in partial fulfillment of the required for the award of a
Masters Degree in Urban Management.
Name of Supervisor___________________ Signature__________________

Date______________________
Name of Internal Examiner____________________ Signature__________________

Date______________________
Nameof External Examiner_____________________ Signature_________________

Date___________________
Name of Head of Department _______________ Signature__________________

Date_____________________
Acknowledgements
There are several people who have helped me in one way or another to achieve the
completion of this thesis. It would have not been possible without the guidance, support
and expertise of my thesis advisor Belete Ejegu (PhD Candidate ) . So, I would like to
begin by thanking Belete Ejegu (PhD Candidate) for his constructive comments and
outstanding help from proposal to this thesis, for allowing me the complete freedom to
pursue this study, to work on my own initiative and for making me to use the potential
that I have with confidence on my ability.
My gratitude goes to the Ethiopian Civil Service University Department of Urban

Management Instructors, Addis Ababa City Administration , Gule Sub City MSEs office,
AdCSI S.C expertise, Mesekerem , Firehiwot Eshetu, Wubishet W/mariam and all my
families who showed much devotion to the success of my thesis supports and
cooperation you gave me while doing this research.
Finally, I would like to extend my sincere gratitude to all those who have not been
mentioned in this thesis work but assisted me in one or many ways like. May God bless
you all!
Table of Contents
Title Page
Declarations.....................................................................................................................................i
Approval..........................................................................................................................................ii
Acknowledgements.......................................................................................................................iii
Table of Contents..........................................................................................................................iv
List of Tables.............................................................................................................................. xi
List of Figures...................................................................................................................xiii
Acronyms..........................................................................................................................xiv
Abstract..............................................................................................................................x
v
CHAPTER ONE.............................................................................................................................1
1. Introduction................................................................................................................................1
1.1. Background of the Study...........................................................................................1
1.2. Statement of the Problem..........................................................................................2
1. 3. Objective of the Study..............................................................................................3
1.3 .1.Genaral Objectives........................................................................................................3

1.3.2. The Specific Objectives................................................................................................3
1.4. Research Questions...................................................................................................4
1.5. Conceptual Definition...............................................................................................4
1.6. Significance of the Study..........................................................................................5
1.7. Scope of the Study.....................................................................................................6
1.8 Description of the Study Area....................................................................................6
1.8. 1 Location and Administration.........................................................................................6

1.8.2 Topography (Relief).......................................................................................................7
1.8.3 Population Size and Density of Gulele Sub City............................................................7
1.8.4 Social Infrastructure and Services..................................................................................8
1.9. Limitation of the Study............................................................................................8
1.10 . Organization of the Paper.......................................................................................8

1.11. Conclusion...............................................................................................................9
CHAPTER TWO..........................................................................................................................10
REVIEW OF THE RELATED LITERATURE..........................................................................10
2. Introduction................................................................................................................10
2.1. Conceptual and Theoretical Review.......................................................................10
2.1. 1. The Concept of Microfinance....................................................................................10

2.1.2. The Development of Microfinance Institutions Globally............................................11
2.1.3. Microfinance Development in Ethiopia......................................................................12
2.1.4. Microfinance Approaches...........................................................................................13
2.1.4.1 Poverty Lending Vs Financial System Approach......................................................13
2.1.4.2 Minimalist Vs Comprehensive Approach.................................................................14
2.1.4.3 Business Vs Development Approach........................................................................14
2.1.5. Lending Methodologies..............................................................................................15
2.1.5.1 Progressive Lending Vs Frequent Repayment Model...............................................15
2.2. Empirical Literature Review on the Role of MFIs..................................................16
2.2.1. Microfinance and its Aim on the Livelihood of the Beneficiary.................................16

2.2.2 The Social Role of Microfinance Institution.........................................................16
2.2.2.1 .Microfinance and its Role to the Development of Human Capital..........................16

2.2.2.2. The Role of Microfinance Institution in Building Social Capital.............................17
2.2.2.3 Social Performance Indicator....................................................................................18
2.2.3. The Economic Role of Microfinance Institutions.......................................................19
2.2.4. The Contribution of Microfinance to Enhance the Development of Micro and Small
Enterprises............................................................................................................................20
3.2.5. Micro Finance Products and Services..................................................................22
2.2.5.1 Loan/Credit Service..................................................................................................23

2.2.5.2. Saving Mobilization.................................................................................................23
2.2.6. Challenges of Micro Finance Institution in Serving the Clients..................................23
2.2.7. International Experiences on Micro-Finance..............................................................24
2.2.7.1. Microfinance and Financial Sector in Bangladesh...................................................24
2.2.7.2.Microfinance Institutions in Uganda.........................................................................25
2.2.7.3. An Over view of Addis Credit and Saving Institution in Ethiopia...........................26

2.2.8. Research Gap..............................................................................................................28
2.2.9. Conceptual Framework of the Thesis..........................................................................30
2.3.10. Conclusion................................................................................................................31
CHAPTER THREE......................................................................................................................32
RESEARCH DESIGN AND METHODOLOGY.........................................................................32
3.Introduction.................................................................................................................32
3.1. Research Design......................................................................................................32
3.2. Research Approach.................................................................................................32
3.3. Method of Data Collection......................................................................................33
3.3.1. Questionnaires............................................................................................................33
3.3.2 In-depth Interview........................................................................................................33
3.3.3. Personal Observation..................................................................................................33
3.4. Sample Design.........................................................................................................34
3.4.1 The Target Population..................................................................................................34

3.4.2 Sampling Frame...........................................................................................................34
3.4.3 Unit of Analysis...........................................................................................................34
3.5. Sampling Techniques..............................................................................................35
3.5.1 Non-Probability Sampling..........................................................................................35

3.5.2 Probability Sampling...................................................................................................35
3. 6. Sample Size............................................................................................................35
3.7. Sources of Data.......................................................................................................37
3.7.1 Primary Data Sources..................................................................................................37

3.7.2 Secondary Data Sources...............................................................................................37
3.8. Data Processing and Presentation...........................................................................37
3.9. Data Analysis and Interpretation.............................................................................37
3.10. Data Presentation...................................................................................................38
3.11. Methods of Ensuring Data Quality (Validity, Reliability and

Representativeness)........................................................................................................38
3.12 Ethical Considerations............................................................................................38
3.13. Operationalization Framework of the Thesis......................................................39
3.14. Conclusion.............................................................................................................39
CHAPTER FOUR........................................................................................................................40
DATA ANALYSIS, FINDINGS AND DISCUSSIONS..............................................................40
4.0. Introduction...........................................................................................................................40
4.1. Response Rate.........................................................................................................40
4.2. Demographic Characteristics of Respondents.........................................................41
4.2.1.Gender of the Respondents........................................................................................41

4.2.2. Age of the Respondents.............................................................................................42
4.2.3. Marital status of the Respondents...............................................................................43
4.2.4. Family Size of the Respondents..................................................................................43
4.2.5. Educational Status of the Respondents.......................................................................44
4.3. Results or Findings..................................................................................................45
4.3.1.Finding Section 1: The Social and Economic Role of Addis Credit and Saving
Institution Share Company to the Beneficiaries in Gulele Sub City.....................................45
4.3.1.1. The Social Role of Microfinance Institution............................................................45
4.3.1.1.1. The Role of MFI on Development of Human Capital...........................................45
4.3.1.1.2. The Role of MFI on Development of Social Capital............................................47
4.3.1.2. The Economic Role of Microfinance Institution......................................................49
4.3.1.2.1 Income of the Beneficiaries...................................................................................49
4.3.1.2.2 Expenditure of the Beneficiaries...........................................................................51
4.3.1.2.3. Income of the Beneficiaries Before joining AdCSI Share Company.....................52
4.3.1.2.4. Capacity for Paying Children’s Better Quality of Schooling................................54
4.3.1.2.5. The Extent of Affording the Medical Expenses of the Beneficiaries....................55
4.3.1.2.6. The level of fulfilling the socioeconomic Demand of Respondents' family..........56
4.3.2 Findings section 2: The Role of Addis Credit and Saving Institution S.C in Enhancing
the Development of Micro and Small Enterprises.................................................................58
4.3.2.1.Role of Microfinance Institutions in Enhancing the Development of a new Business.
..............................................................................................................................................58
4.3.2.1.1 Type of Business Engaged in................................................................................58
4.3.2.1.2. The size of the business.........................................................................................59

4.3.2.1.3. Source of Finance for Starting the Business..........................................................60
4.3.2.1.4.The Business before Starting the Current Business...............................................61
4.3.2.2. Role of Microfinance Institutions to help Existing Business Grow or Expansion .. 62
4.3.2.2.1. The Adequacy of Loan from AdCSI Share Company for Business Expansion
..............................................................................................................................................62
4.3.2.2.2. The Size of Employees Under the Business before Joining AdCSI S.C..............63
4.3.2.2..3 The size of Employees under the Business after Joining AdCSI S.C.................63
4.3.3. Finding Section 3: The kinds of Services and Products provided by Addis Credit and
Saving Institution Share Company In Gulele Sub City to the Beneficiaries........................64
4.3.3.1. Financial Services....................................................................................................64
4.3.3.1.1 Saving....................................................................................................................64
4.3.3.1.2 Loan.......................................................................................................................65
4.3.3.1.3. Insurance Services................................................................................................69
4.3.3.1.4. Third Party Fund Administration........................................................................69
4.3.3.1.5. Mobile Banking....................................................................................................70
4.3.3.2 Non Financial Services.............................................................................................70
4.3.3.2.1. Consultancy..........................................................................................................70
4.3.3.2.2.Micro Lease Loan..................................................................................................70
4.3.3.2.3. Business Development Training ( BDT)...............................................................71
4.3.4.Findings Section 4:The Major Challenges which affect the performance of Addis
Credit and Saving Institution Share Company in Gulele Sub City.......................................71
4.3.4.1.From the Institution Side..........................................................................................71
4.3.4.1.1. Financial Challenges.............................................................................................71
4.3.4.1.2. Management Challenges......................................................................................74
4.3.4.1.3. Technological Challenges....................................................................................76
4.3.4.2. From the Beneficiaries Side.....................................................................................76
4.3.4.2.1. Credit Default.......................................................................................................76
4.3.4.2.2 Using the Loan for un Intended Purpose...............................................................76
4.4. Interpretation and Discussion..................................................................................77
4.4. 1. The Social and Economic Role of Addis Credit and Saving Institution Share
Company to the Beneficiaries in Gulele Sub City................................................................77
4.4.2 .The Role of Addis Credit and Saving Institution Share Company in Enhancing the
Development of Micro and Small Enterprises (MSEs).........................................................83
4.4.3 .The kinds of Services and Products Provided by Addis Credit and Saving Institution
Share Company in Gulele Sub City to the Beneficiaries......................................................86
4.4.3.1.Financial Services.....................................................................................................87
4.4.3.2. Non Financial Services............................................................................................90
4.4.4. The Major Challenges which affect the Performance of Addis Credit and Saving
Institution Share Company in Gulele Sub City....................................................................91
4.5. Conclusion...............................................................................................................95
CHAPTER FIVE..........................................................................................................................96
5. CONCLUSION AND RECOMMENDATION........................................................................96
5.1 Introduction..............................................................................................................96
5.2. Conclusion...............................................................................................................96
5.3. Recommendation.....................................................................................................97
5.3.1. For government body..................................................................................................97

5.2.2 For the Beneficiaries....................................................................................................98
5.2.3. For Academicians and Researchers.............................................................................99
References
Annexes
List of tables
Table 3. 1. Summary of selected sample size....................................................................36
Table 4.1: Respondents by Sex and Age...........................................................................41

Table 4.2: Marital Status and Family Size of Beneficiaries............................................42
Table 4.3: Educational Level of Respondents .................................................................44

Table 4.4. Beneficiaries Participation on Trainings and the Level of its Importance......46
Table 4.5. Social association status....................................................................................48
Table 4.6. Response Regarding Benefit Gained from Social Grouping............................49
Table 4. 7. Mean of the Average Monthly Income and Expenditure................................52
Table .4.8 . The Condition of Income of the Respondents before Joining Program of
AdCSI Share
Company............................................................................................................................53
Table.4.9. The Income of the Respondents after Joining Program of AdCSI Share
Company............................................................................................................................53
Table 4.10. Fixed asset before and after the beneficiaries engaged in AdCSI S.C ..........57
Table 4.11. The size of Business the Beneficiaries Engaged............................................60

Table.4.12. The Business Beneficiaries Engaged in before Starting the Current
Business.............................................................................................................................61
Table 4.13.The Adequacy of Loan from AdCSI S.C for Business Expansion of the
Beneficiaries......................................................................................................................62
Table 4.14. The Number of Employees Under the Business before Using the Program of
AdCSI Share
Company...........................................................................................................................63
Table 4.15. The Status of Beneficiaries' Saving ...............................................................65
Table 4.16 Micro and Small Businesses Loan ..................................................................66

Table 4.17. Response on Payment of Interest on Loan and its Rate Level ....................68
Table 4.18. Response on existence of financial challenges ...........................................72
Table 4.19. Response on the level of interest rate on saving............................................73

List of Figures
Figure 1.1.Location of the Study Area.................................................................................7
Figure 2.1 Conceptual Framework of the Thesis...............................................................30

Figure 4.1: Average Income of Respondents.....................................................................50
Figure 4.2. Average Expenditure of the Respondents.......................................................51
Figure 4.3. Evaluation of the Capacity of better Education for the Children After Joining
AdSI S.C...........................................................................................................................54
Figure 4.4 . The Extent of Covering Medical Expenses of the Beneficiaries....................55
Figure.4.5. Meeting socioeconomic demand of the beneficiaries' family ..................56
Figure 4.6.The Type of Business the Beneficiaries Engaged in......................................59
Figure 4.7 The Number of Employees Under the Business after Beneficiaries Started
Using Program of AdCSI Share Company........................................................................63
Figure 4.8. The Size of Loan in Relation to the Demand of the Beneficiaries..................67
Acronyms
AIDS Acquired Immune Deficiency Syndrome

ACSI Amhara credit and saving Institution
AdCSI S.C Addis Credit and Saving Institution Share Company
AEMFI Association of Ethiopian Microfinance Institution
BDT Business Training Development
DECSI Dedebit credit and saving Institution
EPRDF Ethiopian People Revolutionary Democratic
ERRP Emergency Recovery and Reconstruction Program
FDRE Federal Democratic Republic of Ethiopia
HIV Human Immunodeficiency Virus
MDGs Millennium Development Goals
MF Microfinance
MFIs Microfinance Institutions
MoUDC Ministry of Urban Development & Construction
MSE Micro and Small Enterprise
MSEs Micro and Small Enterprises
MSMEs Micro, Small and Medium Enterprises
NBE National Bank of Ethiopia
NGOS Non Government Organizations
POCSSBO Project office for the Creation of Small Scale Business Opportunities
SPSS Statistical Package of the Social Science
UMF Uganda Microfinance
UN United Nations
Abstract
Microfinance is very important for poor people as well as businesses and provides diversified,
dependable and timely financial and non financial services. This study aimed at assessing the
role of microfinance institutions in promoting the socioeconomic condition of the beneficiaries in
the case of Addis credit and saving institution share company in Gulele sub city . Specifically,
the study aims at assessing the role of AdCSI S.C in promoting the socioeconomic condition of
its beneficiaries , its role in enhancing the development of MSEs, identifying its products and
services , and the major challenges of AdCSI S.C. In the study, mixed research approach was
used. Primary data were obtained from 173 sample respondents using close and open-ended
questionnaires, semi-structured interviews and observation data collecting tools. Primary data
were obtained from branch managers of AdCSI S.C , MSE office and selected governmental
experts and officials , and the beneficiaries of AdCSI S.C . Secondary data was also collected
from books, journals, past research ,thesis, official documents and websites. Stratified sampling
and simple random sampling from probability sampling technique were used to select
proportional number of samples from all types of the beneficiaries of AdCSI S.C. Besides,
purposive sampling technique was used for the key informants . The analytical strategy used
were descriptive statistics, frequency analysis of measures of central tendency and content
analysis to see the results of the major variables . It was found that AdCSI S.C have contributed
to the improvement of the socio economic condition of its beneficiaries via human and social
capita development, income generation and building asset . Like wise, it has positively
contributed to the enhancement of the development of MSEs through financing to start new and
expansion of businesses, creating employment opportunities for operators and for others un
employed , generating income and owning fixed assets to the operators. Further , the finding
revealed that the products and services provided by AdCSI S.C is based on the integrated
approach which is both financial and non financial services . Furthermore , despite its positive
roles , the finding indicated that the major challenges of AdCSI S.C are found to be from the
institution side and the beneficiaries side..Accordingly, the study recommended that the
government should further strengthen and encourage MFIs in order to reduce the prevailing
unemployment and alleviate poverty in the city administration. With regard to the services
rendered by AdCSI S.C , though the services are diversified , it could be even further
diversified by conducting need assessment of the beneficiaries and taking experiences of other
countries similar to Ethiopian economic level . Furthermore , the major challenges identified by
the research should be solved for the effective achievement of the objectives of the MFIs in
general and AdCSI S.C in particular . With this respect , the government should revisit financial
policy to solve the financial challenges , enhance human development in the area via training
and experience sharing , creating conducive working environment and providing incentives
based on merit for the employees to solve the managerial challenges , availing the appropriate
technology for the institution by taking experience from other financial sectors like banks and
insurances and from other experienced MFIs from the country as well as other countries ,
continuous follow up and conducting research to identify the potential problems of the
beneficiaries to alleviate the credit default , creating awareness and continuous follow up of the
beneficiaries for the appropriate utilization of the loan.
Key words : micro finance , role , promote, socio economic condition, challenges
CHAPTER ONE
INTRODUCTION AND BACKGROUND OF THE STUDY
1. Introduction
The thesis assessed the role of microfinance institutions in promoting the socioeconomic
condition of the beneficiaries in Gulele Sub city by taking AdSCI Share company . In this
part , the background of the study highlighted about the issue under the study from the
wider perspective to the narrower perspective by focusing on the main objective under
the study. In addition to this , statement of the problem, objectives, significance, and
scope of study area are included.
1.1. Background of the Study

About 90 percent of the people in developing countries lack access to financial services
from institutions, either for credit or savings. If the people of LDCs have a limited
capacity to invest in capital, productivity is restricted, incomes are inhibited, domestic
savings remain low, and again, any increases in productivity are prevented. A lack of
access to financial institutions also hinders the ability for entrepreneurs in LDCs to
engage in new business ventures, inhibiting economic growth, and often, the sources and
consequences of entrepreneurial activities are neither financially nor environmentally
sustainable . Microfinance serves as a means to empower the poor, and provides a
valuable tool to assist the economic development process (Robinson and
Marguerite,2002).
The most important constraint that poor people face to come out of poverty is lack of
access to credit to run their own businesses. The UN Millennium Development Goals
aspire to reduce poverty by half by the year 2015. The MDGs document recognizes
microfinance as a powerful instrument to alleviate poverty and empower the poor. The
objective of microfinance, as the provision of financial services to poor people that have
been excluded from the formal financial sector for so long, is poverty alleviation.
(Nandazi,2008).
There is high urban population growth in Ethiopia as a result of rural-urban migration and
natural growth of the urban population (Mebratu, 2008). However, such increasing
population has not been well accommodated in the urban centers. As more and more
people come to the urban scene and take their share from the insufficient opportunities
available for the existing urban poor, availability of these opportunities minimizes.
Improving access to financial services is an important development tool, because it helps
in increase their income and consumption, which would in the final analysis reduce
poverty. Lack of financial services, the absences of loan products, micro-insurance
products, conveniences saving instruments and various other financial instruments are a
major constraint limiting the accumulation of assets by the poor and the development of
indigenous enterprises (Peck and W/Yohannes, 2009 ).
1.2. Statement of the Problem

Microfinance plays key role in achieving human, physical and social capital to poor
people. Creating access to education, training and productive capital, organizational
building, and providing physical capital contribute to the self-confidence of the poor. The
provision of capital to the poor in order to alleviate individuals' poverty is not the only
aim of Microfinance; rather it creates financial institutions to poor people who are
excluded from the formal banking sector Wreen (2007). On similar lines, report of the
National Bank of Ethiopia (2010), states that "MFs play vital role in income generation
and asset building as well as poverty reduction and that is mainly because; MFIs largely
serve low income groups that have no or little access to formal bank loans."
The prevailing operations of the conventional financial institutions in many low income
countries such as Ethiopia do not provide substantial credit and saving facilities to the
unemployed who lack collaterals. "Micro-finance in Ethiopia has been considered as one
of the best entry points for solving the socio economic condition of the poor . It is one of
the most prominent instruments of most government’s pro-poor development programs
and strategies"(Mekonnen, 2008).
In national endeavor to reduce poverty and promote sustainable economic development,

Ethiopia had adopted micro finance program through proclamation No 40 /1996 that
enables the licensing and supervision of microfinance institutions (MFI) for the urban and
rural poor. Since the issuance of the regulation, 29 microfinance institutions are legally
operating in the country (Eriksen, 2008).
Addis credit and saving Institution (AdCSI) S.C is one of the microfinance institutions
operating in Addis Ababa City Administration .It was established and registered at the
national bank of Ethiopia on January 2000 according to the bank of (NEB) proclamation
No.40/1996 . Its vision is to become active contributor towards poverty reduction efforts
and would like to see improvement in the life of low income people . Its mission is
promoting micro and small enterprises to alleviate poverty and unemployment prevailing
in Addis Ababa city administration territory through provision of sustainable financial
and other related services with particular attention to women. Since its establishment in
2000, it has attracted a number of clients in its branches in all the ten sub-cities of Addis
Ababa. AdCSI S.C in Gulele Sub City is one of the branches of the ten sub-cities of
Addis Ababa working to achieve the vision and mission of the institution .
There are ten sub branches of AdCSI S.C in Gulele Sub City providing financial services
to micro and small enterprise at a cost recovery and sustainable bases; promoting the
culture of saving among lower segments of the society; facilitating access of the poor to
various saving and credit services; providing demand driven business skill training;
developing self-esteem among clients; and encouraging women to be involved in micro
enterprises . However ,the extent to which the life of the beneficiaries improved is not
well known .Thus, the study was designed to asses the role of Microfinance Institutions
in Promoting the Socio-economic Condition of the Beneficiaries in Gulele Sub City by
taking Addis Credit and Saving Institution Share Company .
1. 3. Objective of the Study
1.3 .1.Genaral Objectives

The general objective of the study is to assess the role of microfinance institutions in
promoting the socioeconomic condition of the beneficiaries in Gulele Sub city by taking
Addis Credit and Saving Institution Share Company.
1.3.2. The Specific Objectives.

The specific objectives are:
1. To assess the social and economic role of Addis Credit and Saving Institution Share
Company to the beneficiaries in Gulele Sub city;
2. To examine the role of Addis Credit and Saving Institution S.C in enhancing the
development of micro and small enterprises in the study area:
3. To identify the kinds of services and products provided by Addis Credit and Saving
Institution Share Company to the target groups/ beneficiaries.
4. To identify the major challenges which affect the performance of Addis Credit and
Saving Institution Share Company in the study area.
1.4. Research Questions

1. What are the social and economic role of Addis Credit and Saving Institution Share
Company to the beneficiaries in Gulele Sub city?
2. What are the roles of Addis Credit and Saving Institution S.C in enhancing the
development of micro and small enterprises in the study area?
3. What are the services/products provided by Addis Credit and Saving Institution Share
Company ?
4. What are the major challenges which affect the performance of Addis Credit and
Saving Institution Share Company in the study area?
1.5. Conceptual Definition

Microfinance is the provision that provides access to various financial services such as
credit, savings, micro insurance, remittances, leasing to low-income clients including
consumers and the self employed, who traditionally lack access to banking and related
services.
Microfinance institutions (MFIs) are institutions which are specialized in delivering
microfinance services, in various ways and according to their own institutional rules.
Socioeconomic condition refers to the existing social and economic situation of the
users/clients of AdCSI Share Company in Gulele Sub city.
Promoting refers to enhancing or improving the level of social and economic status of
the beneficiaries /clients of AdCSI Share Company in Gulele Sub city.
Beneficiaries are the clients /users of AdCSI Share Company in Gulele Sub city .
Enterprises: refers to a formally organized and legalized unit of economic organization

or activity, whether public or private engaged in the manufacturing of goods and services.
Micro Enterprise: refers to an enterprise when the numbers of their employees

(including the owner or family) are not greater than 5 & their total asset is ≤ 100,000
ETB for the industrial sector and ≤ 50,000 ETB for service sector.
Small Enterprise: when the number of their employee is composed of 6-30 & their total
asset is between 100,001 - 1,500,000 ETB for the industrial sector and between 100,001 -
500,000 ETB for the service sector ( MoUDC, 2013)
MF products and Services are products and services provided by AdCSIS.C such as
loan, saving, consultancy and managing third party money.
Challenges of MFIs are constraints those affect microfinance institution in serving the
beneficiaries such as economic barriers, physical barriers, sector risk, self-selection, self-
Exclusion, and Impact of chronic poverty.
1.6. Significance of the Study

The central theme of this paper is to assess the role of microfinance institutions in promoting
the socioeconomic condition of the beneficiaries in Gulele Sub city by taking AdCSI
Share Company. The findings of this study will be useful to the stakeholders including:
i. For Academics Purpose

The findings from this study will help academicians in broadening of the prospectus with
respect to this study hence providing a deeper understanding of the role of microfinance
institutions in promoting the socioeconomic condition of the beneficiaries, its role in
development of micro and small enterprises, identifying the services and products of
AdSCI S.C, and its major challenges which affect the performance . It also helps the
researcher to get deep understanding and for future further study about the study area
issues.
ii. For Microfinance Institutions /MFIs
The findings of this study will help AdSCI S.C, branch and sub branch offices, and others,
within an insight into identify the strengths and weaknesses of the current operating
systems of the institution.
iii. Governmental
It helps the City administration in providing information regarding the role of Addis
Credit and Saving Institution S.C in improving the socioeconomic condition of the target
group of the institution. It also enables the city administration to know what kind(s) of
policies, strategies, and solutions should be framed.
1.7. Scope of the Study

There are many MFIs in Addis Ababa City Administration but the scope of the study is
limited only on AdSCI S.C , clients of AdSCI S.C and MSE office in Gulele sub city. It
focuses on assessing the role of AdSCI S.C in promoting the socioeconomic condition of
the beneficiaries, its role in enhancing the development of micro and small enterprises
operators , identifying the services and products of AdSCI S.C, and its major challenges.
Furthermore, Addis Credit and Saving Institution in Gulele sub city has ten sub branches.
However, the research is limited to three weredas in the sub city; namely wereda 02, 05
and 08 in research focus areas because of limited time and also due to the fact that all
sub branches provide the same kind of service to the clients.
1.8 Description of the Study Area
1.8. 1 Location and Administration

Gulele is one of the 10 sub cities in Addis Ababa City Administration. It covers an area
of 3,119.1 hectares. It is situated in the North part of Addis Ababa, bounded from south -
by Addis Ketema and Arada, from West by Kolfe Keranio, from East by Yeka and from
North by Oromia region .At present , the sub city is divided in to 10 woredas 73 sub
woredas , 200 sefers , and 546 blocks.
Figure 1.1.Location of the Study area
Source: Gulele Sub city integrated land information center
1.8.2 Topography (Relief)

Elevation is an indicator that enable a simple understanding of Topography ( Relief) for a
given area . Gulele sub city is characterized by vigorous type of topography with
noticeable elevation differs and steeply landscape especially in the northern part.
Generally speaking in the sub city, the altitude ranges from 2,449 to 3,016 meters above
sea level which has a range of 567 meters . The highly elevated land exist in the north
while relatively lower elevation exists in south. The highest peak of the city exists in this
sub city at Entoto Mountain altitude value of 3,016.
1.8.3 Population Size and Density of Gulele Sub City

According to the 2007 census, the total population with this sub city is 267, 381 which is
10% of the entire population of the city. From the total population 129,239 are male
while 138,142 are female .Lots of people live in wereda 07 with population number of
37, 012 which is 13.84% of the sub city population and relatively few people live in
wereda 04 with population of 13, 263 which is 4.96% of the sub city population .
The female population exceeds the number of male population by 890 persons on average
at wereda level. In 9 weredas sex ratio is less than 10% , i.e. more sex ratios greater than
hundred are observed only in one wereda. The highest ratio ,i.e .118% , is recorded in
wereda 06 where the male population comprises 54% of the total wereda population.
The densely populated wereda in the sub city is wereda 03 with population density of
304.35 people/ hectare and the least dense wereda is wereda 01 with population density
of 38.36 people/ hectare .Average of 85.72 people live in each hectare are of the sub city
which makes Gulele the 6th densely populated sub city in Addis Ababa.
1.8.4 Social Infrastructure and Services

Addis Ababa Administration plays a major role in a provision and management of
municipal services such as parking, street cleanings, sanitation, housing, water treatment,
flood management, primary and secondary school , health care planning and zoning fire
and ambulance services and other related public works . The major social services in
Gulele sub city are education and health among others.
1.9. Limitation of the Study

Like all research , this study had limitations. Lack of well-organized documents , some of
the respondents were not willing to fill the questionnaire . However, the researcher had
overcome these challenges by using triangulation method and convincing the

respondents by informing the aim and benefit of the research .
1.10 . Organization of the Paper

This Paper organized into five chapters as described below. The first chapter; deals with
introduction, back ground , statement of the problem , objective , significance of the
study , scope of the study , description of the study area and limitation of the study .
The second chapter addresses the review of related literature to the objectives of the
study. The third chapter is about the research design, research approach, research
methods, research techniques, sample design, source of data, data analysis and
interpretation and data presentation. The forth chapter provides research findings,
analysis and discussion obtained through methodology .Chapter five presents
recommendations derived from research findings and analysis as well as conclusions of
the thesis. At the end of the thesis, a set of references and appendices are include.
1.11. Conclusion
In conclusion, this chapter it comprise the background of the study from global to study
area which provide some information on the study area and the aim of the study were
reflected.. In line with this the general objective and specific objectives of the study, the
significance, scope and geographical location of study were addressed in the chapter. In
the next chapter the theoretical and empirical study related to study were reported.
CHAPTER TWO
REVIEW OF THE RELATED LITERATURE
2. Introduction
This chapter looks at various knowledge exhibited and produced by persons and scholars
related to the subject matter under study. The theoretical concepts and empirical practices
about the topic at the global, national and regional level are included. The literature
review part aimed to explore the existing experience of the role of microfinance in
promoting the socioeconomic conditions of the beneficiaries as well as trends and the
general concepts and definitions of Microfinance . An attempt was also made to examine
carefully the service and products of Microfinance Institutions , the role of Microfinance
Institution in the development of MSEs, the major challenges which affect the
performance of Microfinance Institutions .
2.1. Conceptual and Theoretical Review
2.1. 1. The Concept of Microfinance

Robinson, Marguerite (2001) cited in Ali and Alam (2010) defined microfinance as
small-scale financial services primarily credit and savings provided to people who farm
or fish or herd; who operate small enterprises or micro enterprises where goods are
produced, recycled, repaired, or sold; who provide services; who work for wages or
commissions; who gain income from renting out small amounts of land, vehicles, draft
animals, or machinery and tools; and to other individuals and groups at the local levels of
developing countries, both rural and urban.
Microfinance is banking the un bankable, bringing credit, saving and other essential
financial services within the reach of millions of people who are too poor to be served by
regular banks, in most case because they are unable to sufficient collateral (Maanen,
2006).
As Bystrom is also quoted United Nations description, microfinance can be defined as the
sustainable supply of small-scale financial services such as credit, savings accounts, and
insurance to poor and low-income people. Microfinance institutions are the banks
organizations providing these finance services and today most of them operate on a non-
commercial basis. The primary role of the many thousand MFIs or bank of the poor, that
currently operate worldwide is to support the strong (Bystrom, 2008).
Commonwealth Secretariat (2001) defined microfinance as making small loans available
directly to small-scale entrepreneurs to enable them either to establish or to expand
micro-enterprises and small business. The groups of entrepreneurs targeted are those that
would otherwise not qualify for loans from formal institutions.
In broader understanding, Ledgerwood (1999) described that financial service generally
including saving and credit; however, some MFIs also provide credit cards, payment
services, money transfers, and insurance service. Besides, many MFIs provide social
intermediation services such as group’s formation, development of self-confidence, and
training in financial literacy and management capabilities among members of a group.
Thus, the definition of microfinance often includes financial and social financial
intermediations.
2.1.2. The Development of Microfinance Institutions Globally

The history of informal financial institutions, especially private money lending, can be
traced to ancient Egypt and the Middle East. The Old Testament documents restriction on
lending for interest among the Jews and describes morality issues related to collateral
from the poor. (e.g. in the books of Deuteronomy, 23:20; 24:10-13, and Ezekiel, 18:8,
12,13,18) . Thus, money lending to the poor with or without collateral must have been
widely practiced, not only for commerce, but also for private consumption, since the
provisions in these books of laws at the time were attempts to regulate the practice along
religious and moral values, rather than to prohibit them (Degefe, 2009).
In the 1970s government agencies were the predominant methods of providing

productive credit to those with no previous access to credit facilities people who had been
forced to pay usurious interest rates or were subject to rent seeking behavior.
Governments and international donors assumed that the poor required cheap credit and
saw this as a way of promoting agricultural production by small landholders. In addition
to providing subsidized agricultural credit, donors set up credit unions inspired by the
Raiffeisen model developed in Germany in 1864. The focus of these cooperative
financial institutions was mostly on savings mobilization in rural areas in an attempt to
teach poor farmer how to save (Ledgerwood, 1999) as cited in Andinet ( 2011).
Ledgerwood, (1999) indicated that microfinance arose in the 1980s in response to the
doubts and research finding about the delivery of subsidized in credit to the poor famers
through government-owned specialized banks. The significant role of microfinance for
development efforts around the world, particularly poverty reduction efforts, is
undeniable. Where delivered appropriately, microfinance enables clients to protect,
diversify, and increase their income, as well as to accumulate assets, reducing their
vulnerability to income and consumption shocks. Thus, microfinance is an important
component in strategies towards the achievement of the Millennium Development Goals
(MDGs).
MFIs also provide housing microfinance to address the shelter needs of the urban poor in
many cities of the developing world. Since their inception in the 1980s, Housing
microfinance (HMF) loan products have grown considerable and have attained a prominent
position among organizations addressing the shelter needs of the urban poor. They have
responded to the needs of un-banked and under-banked people in society. Increasingly, HMF
is a loan product offered by established MFIs and they implement a broad spectrum of
housing initiatives. They consist mainly of loans to low-income people for home
improvements and renovations or expansion of existing homes (UN-Habitat, 2005).
2.1.3. Microfinance Development in Ethiopia

In the 1950s and 60s agricultural credit was practiced in developing countries of the
world .Ethiopia established agricultural Bank of Ethiopia (Hailu,2005) . This bank
subsidized agricultural credit under strong government supervision and was targeted
towards agricultural modernization and growth. But this financial service was found the
poor farmer for which it was designed. It became unprofitable due to weak repayment
and loan recovery which demanded policy revision and change in service giving
approach.
Following global trends, Ethiopia has adopted this new approach of financial service in
1990 to serve poor community. Ethiopia has adopted micro finance program though
proclamation No. 40/1996. The Licensing and Supervision of Microfinance Institution
Proclamation of the government encouraged the spread of Microfinance Institutions
(MFIs) in both rural and urban areas as it authorized them among other things, to legally
accept deposits from the general public (hence diversify sources of funds), to draw and
accept drafts, and to manage funds for the micro financing business (Getaneh, 2005).
Microfinance is taken as a shift from government and NGOs- subsidized credit programs
to financial services run by specialized financial institutions. With this shift Some NGO
and government micro credit programs were transformed to microfinance institutions
(Degefe,2009).
The potential demand for financial services, particularly microfinance, in Ethiopia is
enormous. However, the existing supply of financial services to the poor is very limited.
The major sources of financial services in Ethiopia are commercial bank, MFIs, and same
semi financial services like “Iquibs”, “Idders” and “Mahabers” and informal sources like
Money lender trader suppliers of credit. Now the Ethiopia micro financial institutions
have shown remarkable program progress in terms of outreach and performance.
However, it should be noted that the twenty seven MFIs meet only less than 20 percent of
the demand for financial service of the poor (Peck and W/Yohannes, 2009).
2.1.4. Microfinance Approaches

There are different approaches to microfinance service provision to the clients. It can be
categorized poverty lending vs. financial system approach, minimalist vs. integrated
approach and business vs. developmental approach.
2.1.4.1 Poverty Lending Vs Financial System Approach

Government organization and donors agree that MFIs can contribute to poverty
reduction. However, there is less consensus about the degree to which, how and when
poverty can be reduced through microfinance. According to Robison (2001), it divides
that the financial system and the poverty lending approaches. Both approaches share the
goals of making financial services available to poor people across the world.
Starving borrowers will use their loans to buy food for themselves or their children. Such
people do not need debt rather they need food, shelter, medicines, skill training and
employment for which government and donor subsidizer and charitable contributions are
appropriate. For these people, microfinance is the next step-after they are able to Work.
From the above discussion, poverty lending approach seems to be more appropriate
towards the poorest of poor in addressing their problems (Robinson, 2001).
2.1.4.2 Minimalist Vs Comprehensive Approach

According to Sabharwal, (2000), minimalist approach emphasizes often executively on
credit access which it sees as the ‘missing piece’ for poverty reduction. Advocates of this
approach restrict their service only to the provision of credit and saving facilitates making
the credit responsible to make the best out of the loan delivered.
In contrast, integrated approach refers to the provision of non-financial services such as
training in health, literacy, social action and environmental awareness besides financial
service (Hickson,2001).This research will attempt the integrated approach to see how the
cases integrate their financial services with other non-financial services in Ethiopia.
2.1.4.3 Business Vs Development Approach

There are two contesting approaches among microfinance supporters: business approach
and development approach. According to Maanen (2004), business approach primarily
focused on organizational achievements such as repayment, cost recovery and
profitability. Hence, their concern is ‘how to develop the industry’ rather than how to
develop the community.
On the other side, development approach emphasis more on break even, impact on credit
and on how the client is doing rather than profitability. Supporters of this approach argue
that the clients should participate in awareness and capacity building programs before
taking their loans. Looking these different approaches, Maanen (2004) in his work
concluded that: The basis difference seems to be whether the MFI should be seen as a
business, be it with a development mission or a developmental body, and be it with a
business character, the answer depends on the type of clients the MFI wants to serve; if
the MFI aims at clients deep down the poverty pyramid…the approach of the
development should prevail. If they look for clients who could eventually “graduate” to
the formal sector, the sound business approach is more logical.
2.1.5. Lending Methodologies

Robert Cull et al, (2007) in their global analysis of lending micro banks, found three main
categories: Group, Individuals, and Village Banking Models. On the other hand,
according to Ledgerwood(1999), MFIs approaches or models are: individual lending,
Grameen Bank solidarity lending, and Latin America solidarity lending village banking
and self-reliant village banks models.
The solidarity group lending model makes loans to individual members in groups of four
to seven. The members cross guarantee each other’s loans to replace traditional collateral.
Clients are commonly female market vendors who receive very small, short-term
working capital loans. Payments are made weekly at the program office. The model also
incorporates minimal technical assistance to the borrowers, such as training and
organization building. Group members normally receive equal loan amounts, with some
flexibility provided for subsequent loans (Ledgorwood,1999).
Individual lending is defined as the provision of credit to individuals who are not
members of a group that is jointly responsible for loan repayment. It requires frequent
and close contract with individual clients to provide credit products tailored to the
specific needs of the business. Individual lending is most successful for larger; urban
based, production-oriented businesses and for clients who have some form of collateral or
a willing consigner (Ibid).
2.1.5.1 Progressive Lending Vs Frequent Repayment Model

Progressive lending refers to the system by which borrowers obtain increasingly larger
loans if repayment is made promptly. As long as the system is credible and alternative
sources of finance are less attractive, this type of incentive can enhance repayments
(Murdoch,1999).Frequent repayment schedules are also seen to act as an added
mechanism to secure repayment. As most MFIs collect repayments before investments
bear fruit, they are in fact lending the borrower’s steady income stream and hence,
securing part of the loan repayment even if projects fail (Nissanke, 2002).
2.2. Empirical Literature Review on the Role of MFIs
2.2.1. Microfinance and its Aim on the Livelihood of the Beneficiary

At the beginning, MF has been introduced in Bangladesh, with the idea of supporting
small, informal microenterprises and to creating self-employment to the extensive and
rapid poverty happened in Bangladesh. However, in 1990s , the concept had a great
attention from the international development community and adequate fund were
budgeted taken as poverty reduction Policy, Bateman and Chang (2012). Particular focus
given to women and having majority women users of Microfinance service is one among
the reasons that contribute to the rise in popularity in Bangladesh and other places where
microfinance institutions are expanding. (Taiwo,2012)
The Grameen solidarity group model is a kind of loan targets at individuals involved in
group form . The average number of individuals in group is 4-7 and this creates a high
social benefit among the individuals. The individuals in the group forecasting the
guarantee of the group trust and help each other. These groups contribute to the
development of a solid network in the society ( Alemayehu, 2008).
The research conducted on DECSI in Tigray has come out with the results that the MFI
service notably contributes to the rise of per-capita household consumption. In addition,
this service has significantly improved housing condition, particularly roofing, which is
considered as a significant wellbeing indicator in the study area (Guush and Gardebroek,
2011). Achamyeleh (2011) in his research on DECSI concluded that the credit taken
shows a positive correlation with the improvement of child nutrition and DECSI targeting
the poor of the poor segment of the society more than the moderate poor rural households
were also the other finding on the service in this area.
2.2.2 The Social Role of Microfinance Institution

2.2.2.1 .Microfinance and its Role to the Development of Human
Capital
According to Nichols, (2004) the provision of microcredit has had a range of positive
impacts on a poor community in central China. In addition, it led to several positive
impacts in the lives of borrowers, particularly in terms of self-satisfaction, economic
security, improved living conditions, increased spending expenditure on education and

health, and an enhanced sense of well-being and expressing a sense of enhanced
confidence in themselves and their ability to manage their own economic affairs. This
enhanced industriousness also led to social benefits at the wider level, it was claimed,
people were now less idle and so less inclined to engage in activities such as gambling,
fighting, and theft.
Orbuch (2011) accredits that the social service provided by microfinance contribute to the
growth of human development. Educational services including trainings contribute to the
overall awareness promotion of the beneficiaries, thereby making them productive in
their life. In addition, it also equips them with the fundamental skills as to how to set
selling prices, purchase goods and calculate properly their costs and benefits. This in turn
contributes to the growth of their income benefit and guarantees the institutions with the
return of their loans.
Based on Kahna and Rahaman (2007) research at MF, spreading the access of education
throughout the society is another critical goal of all Micro Finance Institutions. Besides,
eliminating level of poverty, illiteracy and disease and contributing to human
development is the mission of Micro finance and has a goal of expanding educational
opportunities for the disadvantaged children and their effort is to provide necessary
technical and financial support.
2.2.2.2. The Role of Microfinance Institution in Building Social Capital
The MFI has a number of development assistance programs to promote community
interaction and to sustain social contact either through extended family networks or
geographic proximity as a means of building social capital through frequency of
mandatory meetings with borrower groups. In addition, group lending, achieves clients to
meet weekly in groups to make loan payments low rates of income, builds new social
capital among participants and strengthening existing social capital. These meetings
encourage regular interaction among members of highly localized communities.
Encouraging clients to meet more often (for six to ten months), leads to persistent
increases in social ties. Besides, social interactions encourage norms of reciprocity and
trust. In fact, participation in groups is often used to measure an individual's or
community's degree of economic cooperation (Feigenberg et al., 2010). In addition, as a
result of getting together, Isserles came with the data that the use of contraception and
child immunization had increased.
According Augusto and Ferriera (2007), current microfinance institutions shouldn't only
come demonstrate the impact of their service towards financial wealth, but social benefits
to the community be supposed to come together. Moreover, Orbuch (2011) suggests if
microfinance is going to contribute to the achievement of millennium development goals
it has to involve non-financial services part from the financial services.
2.2.2.3 Social Performance Indicator
The "social performance indicator‟ developed by the Centre for a Russian International
Socio-political and Economic study has been used to evaluate seven microfinance
institutions in Mozambique. The evaluation paper has been presented at the African
economic conference in Addis-Ababa, Ethiopia, in 2007. The social performance
indicator included in the document are:
1. Outreach to the poor and excluded: if the outreach of the microfinance services is
going to be measured it must include the amount of economically and socially excluded
part of the population.
2. Adoption of services and products to the target clients: These measures the number
of beneficiaries satisfied with the products and services of the institution.
3. Improving social and political capital of clients: this assesses the transparency
existing between the institution and the beneficiaries. In addition, it also assesses how
much recognition the beneficiaries’ voice has in the institution and beyond.
4. The Social Responsibility of the Microfinance: this assesses the coordination between
the culture of the microfinance and the cultural and socioeconomic condition of the
beneficiaries. This focuses on the relationship between the credit guarantee and the
existing culture of the beneficiaries. It also assesses the relationship between staff and the
beneficiaries. Besides, it evaluates the participation of beneficiaries in the decision
making of the institution
2.2.3. The Economic Role of Microfinance Institutions

The major objective of microfinance is to help generate income by poor households and
there by alleviate poverty. The increase or decrease in the level of income may have an
implication on the life standard of the individuals. Increasing income, for instance, can
pave a way the opportunity to open business, employment, access to health service,
education, a means to fulfill basic needs and own assets. Moser emphasized that the
development of human capital one of the element of his framework is closely linked to
the economic and social infrastructures such as education, healthcare ensure skills and
knowledge productivity (Moser, 1998).
When properly harnessed and supported, micro finance can scale-up beyond the micro-
level as a sustainable part of the process of economic empowerment by which the poor
can lift themselves. The contribution of MFIs funding to the rural and urban women and
youth, business expansion is the vital role played by MFI. These institutions play a vital
role in boosting up the incomes of their clients. At the MFIs services, the reason behind
the massive use of the loan service as compared to the rest of the services is that most
small scale entrepreneurs require funds for starting up ventures, reinvesting in the
existing businesses or overcoming various financial obligations (Charles, 2003).
Isserles (2009) explained in his research about a small reservation on MFI, that is a little
enhancement has been realized in the lives of the people who have access to the service.
According to European Academic Research (2014), some researchers conducted in
Microfinance (e.g. Malik, Malki, & Imai) showed the result that people who access the
Service of Micro Finance ran away from poverty and their living condition were
improved.
Credit can be used as working capital so that clients' efforts become more productive; for
example, clients can buy produce in bulk at discounted or wholesale prices and resell at
retail prices for more profitability (Brau, et al, 2005). As clients become more productive,
their incomes increase and they are able to accumulate savings for other investments as
well as improvements in welfare (nutrition, hygiene, and housing) and emergencies
(Hashemi, 2003). Improvement in economic activities of the beneficiaries of MFIs will
mean substantial improvements in their clothing, sanitation, feeding, housing, medical
care, household property/equipment owned and ability to cover costs related to school
fees, transportation and other physiological needs (Armendariz et al, 2005).
Regardless of the aim of the MF, encouraging small income people to engage in self-
employed activities, the use of credit has difference for clients to other clients. Though
most people take credit for productive purpose and others also use the loan they take
from MFI for expense purpose, such as school fees, housing, construction materials, and
daily consumption needs ( World vision, 2010). However, Fernando (2010) accredits the
critical call for investigating on the impact of micro-finance model and in its general
trend.
Itana suggested the following in relation to microfinance benefits to the society:
.....at the household level , participant in micro financing leads to increased income , asset
and welfare in terms of food security , housing and health . At the individual level,
participation in micro financing is expected to lead increased control over resources on
the part of women clients, reduced impact on child .At enterprise level , participation in
micro financing is expected to lead increased net worth, net cash flow and increased
differentiation between the micro enterprise and the household , while at the community
level , it is expected to lead to increase in paid employment of community members
(Itana, 2002).
2.2.4. The Contribution of Microfinance to Enhance the Development
of Micro and Small Enterprises
Micro and Small Enterprises, MSEs have been regarded as the engine of economic
growth and development all over the world (Singh , 2014). Today, MSEs constitute
nearly about 90% of the total enterprises in most of the economies (especially in
developing economies) which creates marvelous employment opportunities and is
accounting major share of exports and industrial production (ibid).
The MFIs offer Enterprise Development facilities by assisting people, individually and in
groups, to access financial services to start and grow enterprises which can sustain them
and their families above the poverty line. This is mainly done through the provision of
access to Microcredit services, for building up self-employment, in form of loans at
interest free, low interest and market rates (Rogal,1999). “MFIs help people start or
improve their own small businesses, providing income generation and Employment for
themselves and their families “(Okiocredit, 2005).
Growth in profitability is one of the indicators of improvement in economic activity.
Such growth should be reflected in profitable enterprises, growing enterprises, and
conversion into medium or large enterprises. In addition, small-scale businesses' growth
can be measured in terms of profits. Profit making organizations look at the rate of return
on the resources of the firm (Pandey,1996).
The growth in business can make it possible for firms to train its employees. Naisbitt
(1985), growing businesses have human resource objectives such as helping employees
improve their career opportunities or improving performance through job skill training.
Enterprise development services or business development services or non-financial
services are provided by some MFIs adopting the integrated approach. The services
provided by nonfinancial MFI services are; marketing and technology services, business
training, production training and subsector analysis and interventions (Ledgerwood,
1999).
Enterprise development services can be sorted out into two categories. The first is
enterprise formation which is the offering of training to persons to acquire skills in a
specific sector such as weaving and as well as persons who want to start up their own
business. The second category of enterprise development service rendered to its clients is
the enterprise transformation program which is the provision of technical assistance,
training and technology in order to enable existing SMEs to advance in terms of
production and marketing.
According to FDRE MoUDC (2013), the examinations of attempts institutional
involvement to support MSEs development in Ethiopia came late after 1950s .The new
régime led by the Ethiopian People Revolutionary Democratic Front (EPRDF),
immediately proclaimed the Emergency Recovery and Reconstruction Program (ERRP)
and started a program of private sector development. In 1991, the ERRP, with the support
of the World Bank and the international community to bring about economic
stabilization. It launched public sector reform and private and market economy
development.
One of the measures taken to enhance the operation of MSEs is the issuance of the
licensing and supervision of micro financial institutions proclamation in 1996
(Proclamation No. 40/1996). The principal aim of this proclamation is to enable MSEs
have access to credit facilities, counseling services and income generating projects
through micro-finance institutions. By building the capacity of MSEs, this legislation
provides opportunities and security for the informal sector operators through enhancing
legality and formalization (ibid).
In Ethiopia, a loan size below Birr 100,000 is not attractive and profitable in the
conventional banks because project appraisal and follow up is expensive, micro and small
enterprise operators do not keep records and lack collaterals (Wolda,2003). To alleviate
this challenge another means should be devised to improve access to credit in order to
expand micro and small business opportunities to the poor especially women
(Tsion,2006). It is believed that the provision of micro credit to poor households would
increase their assets and income. As a result the government and some of the NGOs are
involved in supporting micro and small enterprise through micro credit (Brehanu, 2002),
considering micro and small enterprises as a major job creator and income generator.
There fore, the provision of microcredit to the poor especially to women as a strategy
designed to stimulate the contribution of micro and small enterprise in the expansion of
employment opportunity as well as the growth of gross domestic product of the country
in general (Tison,2006).
3.2.5. Micro Finance Products and Services

The degree of which MFIs provide service depends on whether it takes a minimalist or
integrated approach. Advocates for the integrated approach argue that MFIs need to focus
on poverty reduction as their primary goal is to provide services to the poor that integrate
training, basic education, and primary health are inter connected, and the impact for each
can increase when they are delivered together (Moduch and Haley, 2002).
The argument for the minimalist approach is that it is necessary to achieve financial
sustainability first (through financial services mainly credit and savings) and then, when
sufficient profit has been accumulated the MFIs can look in to the possibility of providing
training and educational services.
2.2.5.1 Loan/Credit Service

The service provided by AdCSI S.C included loan, saving, consultancy and managing
third party money. There are (a) micro-business which has a nature of installment
repayment and disbursed for high turnover activities; (b) a small business loan (c) micro
lease loan in which clients choose the machines (d) housing loan product which aims to
enable clients to construct a new or renew house (e) consumer loan (f) short term loan
targets very urgent financial problem (AdCSI,2009).
2.2.5.2. Saving Mobilization

Most MFIs focus on disbursing loans. Their savings services are designed as a means of
collateralizing loans and providing cost capital, they are not designed to meet the poor
need for saving mechanisms (Dicher and Haper, 2007). AdCSI S.C provides voluntary
and compulsory savings that is the former saving is made by clients and non -clients
while the latter saving is done by clients only who are required to save until the loan
repayment is successful completed and the amount of interest rate for saving is 5.5% per
annum (AdCSI,2009).
2.2.6. Challenges of Micro Finance Institution in Serving the Clients
The challenges of reaching the poorest population with microfinance include physical
and economic barriers; self- selection and self-exclusion as well as sector risks and the
deprivation of extreme poverty itself. Maes, J. (2006) has put main challenge of
microfinance institution in serving the beneficiaries such as economic barriers, physical
barriers, sector risk, self-selection, self-Exclusion, and Impact of chronic poverty.
Economic barriers: many microfinance programs use group lending methodology
clients to attend a weekly or monthly meeting to access credit. The cost of transportation
to this meeting, together with the opportunity cost of attendance can present a barrier for
the very poor to participate microfinance programs. Alternatively many, individual
lending or saving programs require clients to save a certain amount before they can by
the poorest populations.
Sector Risk: very poor people are often dependent on subsistence economies and the
unique requirements of financing such activities (payback of the loan for instance, can
only take place after the production period that often lost several months), microfinance
institutions usually shy away from lending to this sector.
Self-selection: it is well known that solidarity groups in Grameen style microfinance
programs and village banks reject very poor members because thus risk the credit value
of the entire group. Self-Exclusion: Even when very poor people are not actively
excluded by a community, they often opt out of community related projects because they
are intimidated, believing that the services offered by such project are not suited to their
needs. To strengthen this point, Fisher and Sriram (2002) points out that Poor people are
excluded not only by better off members, but they also exclude themselves.
Impact of chronic poverty: living in absolute poverty for a prolonged time strongly
affects a person’s dignity and hope for the future, as well as his or her ability to take
initiative and overcome stigma. Moreover, poor health (especially chronic diseases such
as malaria HIV/AIDS) presents a major obstacle for conduction success full micro-
enterprise activities (Maes, 2006).
According to Muhammad (2010), focus on the challenges and opportunities face
microfinance sector in Pakistan, his study resulted that numerous challenges are ahead of
microfinance sector like improper regulations, increasing competition, innovative and
diversified products, profitability, stability, limited management capacity of micro
finance institutions (MFIs) etc.
2.2.7. International Experiences on Micro-Finance
2.2.7.1. Microfinance and Financial Sector in Bangladesh

The most common account is that the microfinance industry has its roots in Bangladesh
with the Grameen Bank and it’s on Bangladesh focus. Microfinance services in
Bangladesh are provided by NGO, MFIs microfinance banks; government programs
nationalized commercial banks and private commercial banks. Group based lending
methodologies prevail (World Bank, 2009).
According to Bangladesh bank NGO-MFIs (estimated at 5000 in number) are the largest
providers of microfinance service in the country serving 61 percent of all borrowers. A
striking go percent of MFI clients are women and the average loan size is about BDT
4000($57). The average interest rate on saving is 5 percent, the service charges on credit
range from 10 to 20 percent for flat collection. The total loan portfolio of the
microfinance borrowers, taking in to account their cross-indebtedness to different
microfinance providers, they likely number 18 million. It is estimated that just over 60
percent of them have incomes below the poverty line (World Bank, 2009).
Given that financial education is not widely recognized as being an important measure
for improving the country’s development there are currently no noteworthy, broadly
applied national wide financial education program in Bangladesh. Bangladesh bank has,
however, established a training academy to develop professionals in the banking sectors.
Microfinance activities in Bangladesh are regulated by the micro credit Regulatory
Authority Act of 2006, which establish the oversight body for microfinance activities, the
micro credit Regulatory Authority. The goal of the Act is provide on all encompassing
regulatory framework for microfinance with in Bangladesh and improve transparency and
accountability with in the Sector (Ibid)..
2.2.7.2.Microfinance Institutions in Uganda

Uganda microfinance (UM) received official notice from the bank of Uganda
microfinance limited had been licensed as microfinance. Deposit taking institution. Long
anticipated this notification market the realization of a long- term vision that motivated
two aspiring entrepreneurs to launch UM in August 1997, as well as the culmination of
three years of intensive preparation, planning, and negotiation.
From UM initial days, the founders were clear about their vision for the organization to
offer quality financial services to micro entrepreneurs and low income people living in
Uganda. When Presented with the opportunity to change institutional form and come
under the supervision of the bank of Uganda to after even more services as well as to
access broader sources of funding and expand operations.
Unlike other MFIs operating in Uganda at the time, Uganda microfinance was never a
one product organization. The organization started operations by offering a range of
credit products and today offers micro enterprise working capital loans (both group and
individual), various loan products for salaried employees, a home improvement loan, a
school fees loan, and a small and medium enterprise loan. Uganda microfinance lending
methodology included a compulsory savings components, mandated at 20 percent of the
loan amount for some of its products. UMF believed the demand for savings services
would be quite high, particularly outside Kampola. In addition, because Uganda capital
markets are not yet well developed, deposits represented the best source of local funding
for loan portfolio for the longer term (Lendgerwood and Whit,2006).
2.2.7.3. An Over view of Addis Credit and Saving Institution in Ethiopia

Addis credit and saving Institution (AdCSI) S.C is a micro financial institution which
operates within the boundaries of Addis Ababa city administration. It was established and
registered at the national bank of Ethiopia on January 2000 according to the bank of
(NBE) proclamation No.40/1996.. It is owned by six shareholders, namely, Addis Ababa
City Administration, A.A. City Women, Youth & Teachers associations', karaalo
Akababi Hulegeb peasant's cooperative & one physical person (AdCSI, 2009).
Since its establishment in 2000, it has attracted a number of clients in its branches in all
the ten sub-cities of Addis Ababa. Each sub-city is again equipped with wereda branches.
Addis Ababa City Government is the major owner of the company and provides many
supports to realize its vision and mission. Addis Credit and Saving Institution is highly
subsidized and gets financial resource 97 percent from Addis Ababa City Government
(Ibid).
Objective, Mission and Vision of the Intuitionist
AdCSI S.C vision is to become active contributor towards poverty reduction efforts and
would like to see improvement in the life of low income people. And its mission is
promoting micro and small enterprises to alleviate poverty and unemployment prevailing
in Addis Ababa city administration territory through provision of sustainable financial
and other related services with particular attention to women. Having this vision and
mission, the institution has broad objectives such as: Provision of credit and saving
services to as many active poor as possible; Enhancing the development of micro and
small enterprises; Giving the priority to women in the provision of financial services;
Creating long term self-employment income generating activities; Enhancing the culture
of saving by target people and wider public; Assume financial and operational self
sufficiency of the institution.
Operational Lending Models

Similar to other parts of the world, MFIs in Ethiopia focus mainly on group–based
lending and promote compulsory and voluntary savings. They use a solidarity group
approach, whereby clients join into groups of 3-7 members and co-guarantee each other’s
loans. These groups meet on the weekly or monthly bases to make loan repayments and
savings deposit. Working through groups is considered as an effective means to expand
outreach and reduces the transaction costs for MFIs. A few MFIs deliver services through
traditional social groups like Idir whose members also guarantee each other’s loans. The
co-guarantee mechanism within the groups serves as an alternative form of collateral. In
addition to group lending methodology, most MFIs use individual lending on the basis of
physical or other collateral. Staring in the mid of 1995 E.C change in policies, procedure
and methodology of the institution has started to provide this individual loans.
Cooperatives and joint ventures are also entertained on the same line.
Type of Loan Products
There are four types of loan products such as micro business loan sometime called
general loan, small business loan, micro lease and housing loan. Micro business loan
product has a nature of installment and it is disbursed for this type of loan ranges from
700 birr to 5000 birr. The second type of loan is small business loan, disbursed relatively
for well established businesses and technical and vocational school graduate students
who want to enter in to productive ventures and the size of the loan is usually greater than
5000 birr and less than 50,000 birr for each entrepreneur. Micro lease loan disbursed for
the purchase of machines according to the choices of clients. This type of loan is rendered
mostly to people who are organized in to cooperatives. Housing loan product is to enable
clients construct anew house or complete a construction in progress. The maximum loan
size is 50,000 birr with loan term of 60 months (or 5 years) and repayable monthly.
Depending up of the nature of, the business, the loan products are characterized in to term
loan and installment loan.
Loan can be provided for the purpose to start and expand business engaged in weaving
and tailoring metal and wood work, food processing and production of construction input,
municipal service like solid waste disposal and parking retail trade, urban agriculture,
leather products and other income generating activities. The main borrowers are Addis
Ababa city residents who are 18years old and above, edirs (legally registered),
cooperatives, joint ventures and other business association.
Loan Size, Interest Rate and Service Charge
The feasibility of the project is given the prime importance in the determination of the
amount of loan to be given on credit and for controlling purpose and the institution
decide the loan size accordingly. This includes both working capital as well as
investment. AdCSI S.C charges 9% of lending interest for installment and micro lease
and 9% for term loans per annum on flat rate basis. In addition to this , 2 % service
charge is paid for all micro lease and small loans. For the housing and consumption loan,
the interest rate is 10 % per annum on decline rate basis (AdCSI,2009).
Saving is an important component of the program, it serves as a sources of lending
capital, provides cash collateral for loans and enable to generate income through interest
spread. AdCSI S.C provides saving service to both borrowers and non-borrowers. There
are three types of saving services provided by the institution. There are mandatory saving
(borrowers specific), personal (voluntary) saving (borrower and non-borrower clients)
(Ibid).
2.2.8. Research Gap

In national endeavor to reduce poverty and promote sustainable economic development,
Ethiopia had adopted micro finance program through proclamation No 40 /1996 that
enables the licensing and supervision of microfinance institutions (MFI) for the urban and
rural poor. The intent of this study, therefore, is to assess the role of microfinance
institution in promoting the socioeconomic condition of the beneficiaries in Gulele sub
city taking AdCSI S.C. It focuses on assessing the role of AdSCI S.C in promoting the
socioeconomic condition of the beneficiaries, its role in development of micro and small
enterprises, identifying the services and products of AdSCI S.C, and its challenges .
In relation to this, different attempts were made at country and international level to show
the role of microfinance institutions from different perspectives. The major ones include:
The research by Lakew (1998) examines POCSSBO’s micro financing program
contribution to poverty reduction. He found that after the credit program employment
opportunity for the beneficiaries have been created. He also noted that the credit program
of POCSSBO had positive effect on income and saving of the clients. In addition, He
stated that medical, education and nutrition access of the clients had been improved
Aklilu (2002) reviewed the importance of micro finance institutions in developing
economies based on countries' experiences. In the review she suggested for promotion of
the existing well developed institution 'idir" to facilitate growth of formal MFIs.
Borchgrevink and et.al (2005), studies marginalized groups, credit and empowerment for
the case of Dedebit Credit and Saving Institution (DECSI) of Tigray. The study found out
that female household heads are extremely marginalized groups; and also, young
households', rural landless households and urban house-renting households are the other
marginalized groups. Through two-phase assessment, the study found that the DECSI's
program has had a positive impact on the livelihood of and as well enhanced the social
and political position of many clients.
Abiola and Salami (2011) examine the impact of microfinance institutions on standard of
living, asset acquisition and savings of hairdressers in Oyo state. The study found that
there is a significant relationship between microfinance efforts and standard of living of
hairdressers in the study location.
Stewart et al. (2010) provided in a systematic review of evidence from Sub-Saharan
Africa indicates the beneficial impacts of microfinance on socio-economic outcomes,
such as income stability and growth, reduced income inequality, reduced vulnerability,
employment, nutrition and health improvements, school attendance, strengthened social
networks, and women’s empowerment .
From the documents reviewed so far, it indicates that the previous studies did not well
address the objectives of this research .Therefore, there is a gap between the research
objectives and the previous studies by different researchers. Hence, the present study
fills the gap and extend knowledge in regard to the role of micro finance in perspective
of promoting the socioeconomic condition of beneficiaries instead of due attention only
to poverty perspective .
2.2.9. Conceptual Framework of the Thesis

Figure 2.2 Conceptual Framework of the Thesis
Micro finance
institutions
MFIs role in /MFIs/

enhancing the social role of
development of
Challenges of MFIs
MSEs
MFIs ( from development
source of the institution of human
finance side & capital
beneficiaries development
job creation
side ) of social
Socio
start business capital economic
financial
challeng
business growth role of
e
technolo MFIs
gical
Services & challeng
products of MFIs e
Economic
( financial & non
manageri role of
financial)
al
challeng MFIs
saving
e
inco
loan me
insurance fund expe

nditu
third party fund re
administration
edu
micro lease loan cati
on
business
development
Source : Compiled from different literature by the researcher heal
training th
asse
t
2.3.10. Conclusion
From above different theoretical and empirical literatures what can be drawn as a
conclusion is that Microfinance is banking the un bankable, bringing credit, saving and
other essential financial services within the reach of millions of people who are too poor
to be served by regular banks, in most case because they are unable to sufficient
collateral. The history of informal financial institutions, especially private money
lending, can be traced to ancient Egypt and the Middle East.
Following global trends, Ethiopia has adopted the new approach of financial service in
1990 to serve poor community. She has adopted micro finance program though
proclamation No. 40/1996. There are different approaches to microfinance service
provision to the clients. It can be categorized poverty lending vs. financial system
approach, minimalist vs. integrated approach and business vs. developmental approach.
Micro finance led to several positive impacts in the lives of borrowers, particularly in
terms of self-satisfaction, economic security, improved living conditions, increased
spending expenditure on education and health, and an enhanced sense of well-being and
expressing a sense of enhanced confidence in themselves and their ability to manage their
own economic affairs.
implication on the life standard of the individuals..The MFIs offer Enterprise
Development facilities by assisting people, individually and in groups, to access financial
services to start and grow enterprises which can sustain them and their families above the
poverty line.
The service provided by AdCSIS.C included loan, saving, consultancy and managing
third party money.) . Maes, J. (2006) has put main challenge of microfinance institution
in serving the beneficiaries such as economic barriers, physical barriers, sector risk, self-
selection, self-Exclusion, and Impact of chronic poverty.
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.Introduction
In the preceding chapter , the literature pertaining to the Role of Micro finance
Institutions in Promoting the Socioeconomic condition of the beneficiaries were
reviewed. The purpose of this chapter is to present the underlying principles of research
methodology and the choice of the appropriate research method for the thesis. It included
issues related to research method, research type, research approach, data collection
instrument, sampling design, sources of data and way of data analysis and presentation.
3.1. Research Design

The research design employed was descriptive research method. Descriptive research can
be either quantitative or qualitative. Descriptive method is selected due to the fact that it
is pertinent to collect details of data from many respondents; it is widely used in social
science streams. It describes what the reality or what actually exist within a situation,
such as current practices, progresses, and situations of different aspects of the research.
Descriptive Research is helpful to show situations as they currently exist. That means the
study determines and describes the way things are.
Cross-sectional Study was used for the study in the sense that all relevant data were
collected at a single point in time. The reason for preferring a cross-sectional study rather
than Longitudinal Study is due to the vast nature of the study and the limitation of time.
And obtaining information from a cross-section of a population at a single point in time is
a reasonable strategy for pursuing many descriptive researches due to lack of time and
budget
3.2. Research Approach

The study employed mixed research approach, because, mixing both approaches is highly
recommended to offset the weaknesses of the approach and to benefit from their strength.
Qualitative research is typically used to answer questions about the complex nature of a
phenomenon, often with a purpose of describing and understanding the phenomenon
from the participant’s point of view. It seeks a better understanding of complex situations
and often exploratory and descriptive in nature. In quantitative research, many people can
be studied but the contact is short, the focus is to generate extensive information
(breadth) and generates statistics or figures.
3.3. Method of Data Collection

In order to gather first hand information, combinations of different data gathering tools
were developed and utilized. Quantitative data was collected from beneficiaries by using
a set of questionnaires composed of both open and close ended questions. The questions
were directly asked and filled by the researcher. The major reason was that the researcher
expected that some respondents might not be able to read and write. To triangulate and
supplement responses provided through questionnaires as well as to provide answer for
the how part of the research question, qualitative data was gathered from the key
informants via interview and observation.
3.3.1. Questionnaires
Questionnaire was set and used to collect relevant and first hand information from
selected sample clients & experts of AdCSI S.C. It was employed as the main data
gathering instrument because it is easier to handle and is simpler for respondents to
answer within short period of time. It is useful for the collection of appropriate data and
to secure data from many respondents at a time. Besides, it allows respondents to respond
to questions confidentially and enables the researcher to use representative samples as
source of data to avoid exposing to biases.
3.3.2 In-depth Interview

Semi-structured interview was also used as an instrument to collect useful information
from officials of AdCSI S.C and MSE office in Gulele Sub city guided by schedules, i.e.
a set of general questions or topic. The schedules are flexible and can be updated after
each interview.
3.3.3. Personal Observation

The third instrument was personal observation. Under direct observation the researcher
observes the situation without asking respondents. It is Suitable to study respondents who
are not capable of expressing themselves.
3.4. Sample Design
3.4.1 The Target Population

There are 10 branch offices of AdCSI S.C in Gulele Sub cit. Out of these, three branches
in the Sub city and their respective clients were selected for the study. The officials and
experts of AdCSI S.C, the clients and heads and sample experts of MSEs office in
Gulele sub city are the population of the study. There are 15, 500 clients in Gulele Sub
city of these, 2,978, are in the three selected Sub-branch offices. From 2,978, 768 of them
are in wereda 02, 1,017 in 05 and 1,193 of them are in wereda 08. 5 heads and 18 experts
of AdCSI S.C in the three weredas and MSEs office in Gulele Sub city .
In this study, a multi stage sampling method was used to select respondents .In the first
stage, Addis Ababa City was stratified in to 10 Sub cities. Then Gulele Sub city was
randomly selected from the 10 Sub cities since the services of AdCSI S.C are the same in
all Sub cities .In the second stage, among the 10 weredas of the Sub city, three weredas
were selected using a simple random technique as the services of AdCSI S.C are the same
in all weredas .In the third stage , all the sampled wereda respondents were drawn using
both probability and non-probability sampling technique .The branches of AdCSI S.C
and experts were selected using simple random sampling method since they are
homogenous. Purposive sampling method was used for the leaders of AdCSI S.C and
MSE office in Gulele Sub city as they are key informants. Proportional Stratified
Sampling technique was used in order to accommodate heterogeneity since the clients
are individuals, associations (MSEs operators) and group borrowers.
3.4.2 Sampling Frame

The sampling frames of this study are the list of the total number of clients, experts and
officials of AdCSI S.C In Gulele sub city in the study areas, heads and sample experts of
MSEs office in Gulele sub city
3.4.3 Unit of Analysis

The sampling unit or units of analysis are the sample clients, heads and sample experts
of AdCSI S.C. in Gulele sub city of the three branch offices and head of MSEs office in
Gulele sub city .
3.5. Sampling Techniques

The researcher employed both probability sampling and non-probability sampling design
or techniques to assure accuracy of the research findings.
3.5.1 Non-Probability Sampling

Non-probability sampling techniques (purposive sampling techniques) used in dealing
with the leaders , work process , employees of AdCSI S.C and MSEs office in Gulele
Sub city as they are key informants.
3.5.2 Probability Sampling

From Probability sampling method Stratified Random Sampling (SRS) techniques were
employed to select/draw units from the beneficiaries .The probability sampling was
employed to avoid the biased result to select systematically research participants who are
involved in questionnaires.
3. 6. Sample Size
Bartlet (2001), set formula to determine the sample size by specifying margin of error.
Hence by considering the level of acceptable error at 7%, the sample size required for this
research was determined by using the following formula:
1. If N ≥10,000 then, sample size n= z²pq
d²
2. If N<10,000 then, sample size fn = n / 1+n
N
Where N=population size
n=desired sample size, Z=at 93%confidence level which is 1.81
P=estimated characteristics of target population; q=1-p
d=level of significance test (7%) margin error
Therefore, proportion of group of society is 0.50, the Z statics is 1.81 and the desired
accuracy at the 0.07 level, then the sample size for the population greater than 10,000
would be:
n= z²pq where Z= 1.81 p=0.5 q=1-p d=0.07

d²
n= (1.81)² (0.5) ² × (0.5) = 167.14
(0.07) ²
≈ 167 For N ≥10,000 .Since, the sample population of 2,978 which is less than 10,000;
the following formula was applied to determine the sample size of clients.
fn= n Therefore, N=2,978 and n=167,then the sample become calculated :

1+n
N
= 167 n=158.13 ≈ 158selected from entire population
1+167
2,978
158 sample clients, 4 leaders and 9 experts of AdCSI S.C in Gulele sub city of the study
area , 1 head of MSE office and 1 Work process owner of MSE office in Gulele Sub city
which is totally 173 were the sample size for the study.
Table 3. 1. Summary of selected sample size
Type of Wereda Sample Wereda Sample Wereda Sample Total Sample

clients 02 distribution 05 distribution 08 distribution distribution
popn. popn. popn.
Individuals 424 23 618 33 1012 53 2,054 109
Groups 300 16 373 20 87 5 760 41
Associations 44 2 26 1 94 5 164 8
Total 768 41 1,017 54 1,193 63 2,978 158
Source: Own table based on chapter three

3.7. Sources of Data

For this study both qualitative and quantitative data were collected from both primary and
secondary data sources. The reason for using both quantitative and qualitative data types
is to gather reliable data and to increase the validity of data and findings.
3.7.1 Primary Data Sources

Primary data was collected through a survey and obtained from different populations by
non probability and probability sampling techniques
3.7.2 Secondary Data Sources

Secondary data were used to compare it with the primary data and strengthen the data from
primary sources .Hence, secondary data includes documents such as legal documents, websites,
strategy documents, manuals and directives related with Microfinance Institutions were used.
Moreover, various reports and other documents were surveyed to obtain pertinent data such as
the number of clients, the type of product and services provided by the AdCSI S.C.
3.8. Data Processing and Presentation

The method of data processing in this study was manual and computerized system. In the
data processing procedure editing, coding, classification and tabulation of the collected
data were used. Data processing has two phases, namely: data cleanup and data reduction.
During data cleanup the collected raw data were edited to detect anomalies, errors and
omissions in responses and checking that the questions were answered accurately and
uniformly. The process of assigning numerical or other symbols came next which were
used to reduce responses into a limited number of categories or classes. After this, the
processes of classification or arranging large volume of raw data into classes or groups on
the basis of common characteristics were applied. Data having the common
characteristics were placed together and in this way the entered data were divided into a
number of groups. Finally, tables, charts, and pie charts were used to summarize the raw
data and presentation in the form of tabulation for further analysis.
3.9. Data Analysis and Interpretation

The data gathered through various instrument was analyzed using different descriptive
statically tools. The response that was obtained from self-administered questionnaires
were edited, categorized and coded. The quantitative data was analyzed through the
Statistical Package for Social Science (SPSS) version 21 and Excel. Specifically,
descriptive statistics techniques such as frequencies, percentage, and multiple response
analysis was used to analyze data gathered through survey tools. The qualitative data was
gathered from interviews and document analyzed following deductive theoretical
framework through narrative analysis
3.10. Data Presentation

The analyzed data was presented in an understandable fashion by taking into
consideration the type of data, its purpose, audience and medium. In the study the data
was presented by using tables, percentages, charts and figures. The qualitative data was
discussed and analyzed qualitatively in a way it presents the information appropriately.
The written qualitative data was grouped, and triangulated with quantitative data finding
and analyzed.
3.11. Methods of Ensuring Data Quality (Validity, Reliability and

Representativeness)
For this study , questionnaire was tested on potential respondents to make the data
collecting instruments objective, relevant, suitable to the problem and reliable. Issues
raised by respondents were corrected and a questionnaire was refined. Besides, proper
detection by an advisor is also taken to ensure validity of the instruments. Finally, the
improved version of the questionnaires was printed, duplicated and dispatched. The
instruments selected can help to show the Role of Micro finance Institution in Promoting the
socioeconomic condition of the beneficiaries in Gulele Sub city by taking AdCSI S.C. as a case.
3.12 Ethical Considerations

All the research participants included in this study were appropriately informed about the
purpose of the research and their willingness and consent is secured before the
commencement of distributing questionnaires and asking interview questions. Regarding
the right to privacy of the respondents, the study maintained the confidentiality of the
identity of each participant. In all cases, names are kept confidential, thus collective
names like ‘respondents’ are used.
3.13. Operationalization Framework of the Thesis

In order to properly measure/answer the research objectives concepts are properly
identified to include in each research objectives, define their meaning in the study and
operational zed into measurable indicators/variables. This is because to address the
research objectives. Therefore, in order to organize the research and properly address the
research objectives, operationalization of the research objectives done is annexed
(Annex-IV).
3.14. Conclusion
In conclusion, the researcher used descriptive research type to describe the existing
situation by using qualitative and quantities approaches. In order to attain the objective
and answer the designed questionnaires of the study , a Primary data collected though
research tools as well as secondary data referenced from books, internet and printing
media was employed in the study. To collect primary data Survey Research Techniques
through questionnaires, interview and field observation used as the tools for data
collection. Sample is selected through both probability and non probability techniques
and the collected data was coded, tabulated and analyzed using SPSS and excel,
presented through Statistical tools (tables and graphs) according to the objective of the
study .In the research process the issue of research ethics seriously respected. The next
chapter focused on the data analysis, findings and interpretation of study results.
CHAPTER FOUR
DATA ANALYSIS, FINDINGS AND DISCUSSIONS
4.0. Introduction
This chapter analyzes, interprets, discuses and presents data in its organized form based
on the formulated objectives of the study to assess the role of Microfinance Institution in
promoting the socioeconomic condition of the beneficiaries by taking AdCSI Share
Company in Gulele Sub city. In this context data gathered through questionnaire,
interview and field observation were analyzed and interpreted then discussed.
The chapter contains introductory part of data analysis and interpretation, socio-economic
and demographic characteristics of respondents, the major findings in order which
answers the objective of the study and discussion based on the findings. Raw data
collected from the field was sorted and summarized in tables, charts and diagrams. The
process of data analysis involved several stages. Completed questionnaires were edited
for completeness and consistency. The responses from the open-ended questions were
coded; the level of argument and disagreement used for responses. Multiple response and
Content analysis was also used in the analysis of some of the multiple answers and open
ended questions respectively.
4.1. Response Rate

From the total 158 distributed questionnaires to the beneficiaries 152 (96.2%) of
questionnaires were returned back and this is 96.2% response rate of the total
questionnaire distributed to the participants of the study. Whereas, manager and vice
manager of AdCSI S.C, work process and experts ,and manager of MSE office and work
process in Gulele Sub city totally 15 were interviewed with the response rate of 100%
was analyzed with the questionnaire findings. Based on the above information, the data
collected from the beneficiaries, experts, work process owners, and the managers as well
as from personal observations are enough to make analysis and to interpret the role of
Microfinance Institution in promoting the socioeconomic condition of the beneficiaries
by taking AdCSI S.C in Gulele Sub city .
4.2. Demographic Characteristics of Respondents

The demographic information is assumed to be very important to analyze the relevance
and the capacity of the participants of the study to provide the required information about
the topic under the study .Hence , the characteristics of the respondents such as sex ratio,
age structure of the participants, educational level, Family size and work experience of
the respondents (leaders and employees) from AdCSI S.C and MSE office in Gulele Sub
city and beneficiaries are compiled from the survey .
Table 4.1: Respondents by Sex and Age
Description Respondents Category
Beneficiaries Leaders Employees Total
Group Association Individual
Sex of Male No 8 3 45 4 4 64
Respondents % 20.5 37.5 42.9 66.7 44.4 38.3
Female No 31 5 60 2 5 103
% 79.5 62.5 57.1 33.3 55.6 61.7
Total No 39 8 105 6 9 167
% 100 100 100 100 100 100
Age of 18-35 No 15 4 20 6 9 54
Respondents years % 38.5 50 19 100 100 32.3
36-45 No 16 3 52 - - 71
years % 40 37.5 49.5 - - 42.5
Over No 8 1 33 - - 42
46 % 20.5 12.5 31.5 - - 25.2
years
Total No 39 8 105 6 9 167
% 100 100 100 100 100 100
Source: Survey data, 2015
4.2.1.Gender of the Respondents

Beginning of 1976, United Nations Decade for Women, feminist educators and activities
from all over the world, have struggled to change and promote development thoughts and
practices of women. Due to the impact of this, nowadays programs promoting the
development process of women are being introduced. Moreover, much of the
microfinance work target currently focuses on women.
The sample of this study incorporates both female and male participants. It shows that
103 (61.7) of the respondents are female and 64 (38.3) of them are male. This is
testimony to the fact that most beneficiaries from AdCSI S.C are women.
4.2.2. Age of the Respondents

According to Stoeldraijer and Van (2010) in discussion paper developed based on age,
wage and productivity in 2010 having seen many cross-section time series estimations, it
has been found out that the highest productivity age category is 30-45 and the lowest is
25 and below.
In this study, 71 (42.5 % ) of respondents were in the age group 36 - 45 years, 54 (32.3
%) indicated being between 18 -35 years, and the rest 42 (25.2% ) in the age group 46
years and above. This means that a greater number of respondents were between 36 - 45
years which is consistent with that of Stoeldraijer and Van(2010) .
Table 4.2: Marital Status and Family Size of Beneficiaries
Description Beneficiaries
Group Association Individual Total

Marital Unmarried No 8 5 46 59
Status of beneficiaries % 20.5 62.5 43.8 38.8
married No 31 3 54 88
% 79.5 37.5 51.4 57.9
Divorced No - - 5 5
% - - 4.8 3.3
Total No 39 8 105 152
% 100 100 100 100
Family size of 1-4 No 16 7 72 95
beneficiaries % 41 87.5 68.6 62.5
5-10 No 23 1 26 50
% 59 12.5 24.8 32.9
More than 10 No - - 7 7
% - - 6.7 4.6
Total No 39 8 105 152
% 100 100 100 100
4.2.3. Marital status of the Respondents

As Schwartz (2013), depicts lonely women (single, widowed, separated and divorced),
have a better tendency to become beneficiaries of microfinance.
In terms of marital statuses in this study, 59 ( 38.8 %) of respondents are single, 88
(57.9 % ) married, whereas 5 ( 3.3% ) of them are divorced. The result indicates that the
majority , 88 (57.9 % ) of the beneficiaries are married. Yet, this marital status data is
consistent with that of Feleke's (2011) data. According to Feleke the majority of the
women beneficiaries were married. Besides, Feleke also depicts that due to their marriage
partners the beneficiaries find it easy to gain better business ideas and additional income
from their partners in order to start income generating activities.
4.2.4. Family Size of the Respondents

When a family has a large number of members a Varity of interests and occupations will
exist. This potentially leads to the multifaceted demand for finical services. A probability
of diversified income generating activities will be real in the family and result different
sources of income for repaying loan and reduce the external risks Monje, Gonzalez,
Meyer, Navajas, Schreiner and Rodriguez as cited in Taiwo (2012).
In this study, the family size was defined the number of people who live together
permanently. Concerning the family size, 95 ( 62.5 % ) of the respondents have 1-4
family, 50 (32.9%) of the respondents have between 5 -10 , whereas 7 (4.6 %) have 10
and above family.
Table 4.3: Educational level of Respondents

Description Respondents Category
Beneficiaries Leaders Employees Total

Group Association Individu
al
Educational level Illiterate No 9 - 14 - - 23
of Respondents % 23 - 13.3 - - 13.8
1-8 No 14 - 33 - 47
% 35.9 - 31.4 - - 28.2
9-12 No 16 3 34 - - 53
% 41.1 37.5 32.4 - - 31.7
Diploma No - 5 24 6 9 44
& above % - 62.5 22.9 100 100 26.3
Total No 39 8 105 6 9 167
% 100 100 100 100 100 100
4.2.5. Educational Status of the Respondents

As Feleke (2011) indicates microfinance creates a much better positive effect on beneficiaries
equipped with a better education and skill training on business administration, income
generating and loan repaying, than on beneficiaries have no education and training skills.
According to table 4.3 , the majority , 53 ( 31.7 % ) of respondents attended grade 9-12
, 47 (28.2 % ) of the sample respondents have attended elementary school or grades 1 -8,
44 (26.3%) of the sample respondents have diploma and above while the reaming 23
(13.8 % ) of the sample respondents are illiterate.
As this educational status data indicates 23 (13.8 % ) of the beneficiaries have no any
kind of literacy skills. In a related issue, as the finding from key informant interview
indicates that the reason for this is due to the beneficiaries' absenteeism and withdrawal
during training programs. Hence, the institution taking into account the benefit of skill
training should manage to engage beneficiaries in skill training programs.
4.3. Results or Findings

This part focuses on the findings of the data gathered from primary data sources through
questionnaires, interviews, and observation to address the specific objectives of the study.
Thus, the study contains four specific objectives and the findings for each of them were
identified as follows.
4.3.1.Finding Section 1: The Social and Economic Role of Addis Credit

and Saving Institution Share Company to the Beneficiaries in Gulele
Sub City.
One of the specific objectives of the study is ‘to assess the social and economic role of
Addis Credit and Saving Institution Share Company to the beneficiaries in Gulele Sub
city” . To this end, the social role of microfinance institution (the role of MFI on the
development of human capital, the role of MFI on development of social capital ) and
Economic role of MFI (the condition of the income ,expenditure of beneficiaries, the
capacity to better quality education to children, the capacity to health and to fulfill the
socioeconomic demand of the beneficiaries family ) are presented under this specific
objective .
4.3.1.1. The Social Role of Microfinance Institution

4.3.1.1.1. The Role of MFI on Development of Human Capital
Human Capital includes household members' knowledge, skill and capability to improve
their day to day living conditions.
I. Beneficiaries Participation on Trainings

Orbuch (2011) accredits that the social service provided by microfinance contribute to the
growth of human development. Educational services including trainings contribute to the
overall awareness promotion of the beneficiaries, thereby making them productive in
their life. In addition, it also equips them with the fundamental skills as to how to set
selling prices, purchase goods and calculate properly their costs and benefits. This in turn
contributes to the growth of their income benefit and guarantees the institutions with the
return of their loans. With regard to this , the beneficiaries were asked whether training
is provided by AdCSI S.C or not and its level of importance. Accordingly , the response
is presented in table 4.4 below.
Table 4.4. Beneficiaries participation on Trainings and the level of its

Importance
No Item Beneficiaries Response
Yes No Total
No % No % No %
1 Is there training provided by AdCSI S.C? 97 63.8 55 36.2 152 100
2 If your answer to Question one is 'Yes',
what is its level of significance?
Very significant 31 32
Significant 40 41.2
Less significant 18 18.6
Not significant 8 8.2
Total 97 100
Regarding training provided by AdCSI S.C., 97 (63.8 %) of respondents had been

trained in business development and management, basic short computational and skills
training, conflict resolution among centers & groups and other awareness creation about
crosscutting issues like gender and the environment training whereas 55 (36.2% ) of the
respondents were not participated on training. This implies that significant level of the
beneficiaries lack skills in business development and management, conflict resolution
among centers and groups and the likes .
Concerning the level of significance of the training , 31 (32 %) of respondents among

those who have taken the training replied Very significant, the majority , 40 (41.2 % ) of
them responded Significant , 18 (18.6 % ) of them responded less significant while the
rest 8 (8.2 %) of the respondents who have taken the training responded not significant .
Though the majority of the sample respondents who have taken the training replied the
training is significant , a significant number of them also indicated the level of the
training is less significant and not significant . This implies the quality of the training
might have some problem . So, the institution should give due emphasis to the training
given to the beneficiaries .
4.3.1.1.2. The Role of MFI on Development of Social Capital

Social capital can be expressed in terms social network, trust and solidarity, cooperation
and support. According Augusto and Ferriera (2007), current microfinance institutions
shouldn't only come demonstrate the impact of their service towards financial wealth, but
social benefits to the community be supposed to come together. Moreover, Orbuch
(2011) suggests if microfinance is going to contribute to the achievement of millennium
development goals it has to involve non-financial services part from the financial
services.
I. Social Grouping
MFIs have a number of development assistance programs to promote community

interaction and to sustain social contact either through extended family networks or
geographic proximity as a means of building social capital through frequency of
mandatory meetings with borrower groups. In addition, group lending, achieves clients to
meet weekly in groups to make loan payments low rates of income, builds new social
capital among participants and strengthening existing social capital. These meetings
encourage regular interaction among members of highly localized communities.
Encouraging clients to meet more often (for six to ten months), leads to persistent
increases in social ties. Besides, social interactions encourage norms of reciprocity and
trust. In fact, participation in groups is often used to measure an individual's or
community's degree of economic cooperation (Feigenberg et al., 2010).
With regard to this , the beneficiaries were asked whether they are member of social
group or not . Accordingly , the response is indicated in table 4.6 below.
Table 4.5. Social association status
Item Beneficiaries' Response
Yes No Total
No % No % No %
Is there social grouping ? 104 68.4 48 31.6 152 100
As indicated in the above table 4. 5, 104 (68.4 % ) of sample respondents were member
of different social grouping or associations. And the reaming 48 (31.6 %) were not
participating in any of social grouping. This implies that most of the respondents are
involved in different social associations which is consistent with that of Feigenberg et al.
( 2010). However, a significant number of sample respondents 48 ((31.6 %) are not
participating any associations. This might be due to lack of awareness about its benefit .
So, the institution should work hard on this issue and make them participate in social
grouping or association .
II. Advantages of Social Grouping
Regarding the advantages of social grouping, the majority of the respondents indicated
that their social grouping is helping them in sharing of ideas, gaining experience of
business and life and further for sharing of local goods in the case of social celebrations
created among them, they get together in different social ceremonies and have their own
regulation.
III. Benefit Gained by Beneficiaries from their Social Grouping
The beneficiaries were asked to indicate the level of benefits they gained from their social
grouping or association . Accordingly , the response is presented in table 4.7 below.
Table 4.6. Response regarding benefit gained from social grouping
No Item Beneficiaries Response
Yes No Total
No % No % No %
1 How do you evaluate the level of significance
of benefit gained from social grouping?
Very significant 28 27
Significant 61 58.7
Less significant 19 18.3
Not significant - -
Total 104 100
Concerning benefits gained from their social grouping 28 (27 %) of respondents among
those who have social grouping or association responded very significant, 61 (58.7 % )
of respondent said significant,19 (18.3 %) of them responded less significant.
The information obtained from interview ,15 (100%) indicated that social grouping
contribute regular money they use for the support of different social ceremonies among
them like 'Edir' help local market association in selling and accessing the wholesalers,
through their own saving system also beneficiaries cooperate by giving a prior loan
chance firstly to the most disadvantaged member of the group, their association helped
them to share all the challenges and opportunities of business and life, they get together
in every social ceremony and when one member of the beneficiaries faces risks in her/his
business affairs, the others cooperate by covering her/ his loan and thereby saving her
from moral problems. This indicates that the social grouping helped the beneficiary
significantly from wide perspective which is inline with the response of the beneficiaries.
4.3.1.2. The Economic Role of Microfinance Institution
4.3.1.2.1 Income of the Beneficiaries

education, a means to fulfill basic needs and own assets. Moser emphasized that the
development of human capital one of the element of his framework is closely linked to
the economic and social infrastructures such as education, healthcare ensure skills and
knowledge productivity (Moser, 1998).
AdCSI S.C beneficiaries were asked to tell their average monthly income and
expenditure to know, the status of beneficiaries which is summarize in Figures below.
Figure 4. 1: Average Income of Respondents
As it is indicated in figure 4.1 , 7 (4.6%) of the sample respondents have average

income of less than 500 birr, 35 ( 23%) of the sample respondents' average income is
501 -1000 birr and similarly , 35 ( 23 %) of the sample respondents average income is
2001-4000 birr , 21 (13.8%) of the sample respondents average income is 1001-
2000 ,and the majority, which is 54 (35.6%) of the respondents' average income is 4001-
10,000 . This implies that the majority of the sample respondents have average monthly
income of 4001-10,000 which can indicate nominal average income of the
beneficiaries .
4.3.1.2.2 Expenditure of the Beneficiaries

The sample respondents were asked to indicate their average monthly expenditure ,
accordingly their response is presented in the figure 4.2 below.
Figure 4.2. Average expenditure of the Respondents
As it is indicated in figure 4.2 , 21 (13.8 %) of the sample respondents have average

expenditure of less than 500 birr, 48 (31.6 %) of the sample respondents' average
expenditure is 501 -1000 birr and similarly , 48 (31.6 %) of the sample respondents'
average expenditure is 2001-4000 birr , 21 (13.8%) of the sample respondents' average
expenditure is 1001-2000 , and the rest 14 (9.2 %) of the sample respondents' average
expenditure is 4001-10,000 . This implies that the majority of the sample respondents
have average monthly expenditure of 501 -1000 and 2001-4000 . This shows that the
beneficiaries have something that they save covering their costs .
Table 4. 7. Mean of the Average Monthly Income and Expenditure
Item Frequency/ Minimum Maximum Range Mean Median Std. Variance

No of Reps. Deviation
Average 152 500.00 10000.00 9500.00 3071.428 2200.0 2420.36 5858142.85
Income
Average 152 400 7800.00 7,400 2315.181 1800.0 1921.203 3691021.
Expendit 2
ure

As table 4.7 reveals, the mean of average income of the beneficiaries is 3,071.4286
whereas the mean of average expenditure of the beneficiaries is 2,315.1818 . The finding
indicates that the mean of average income is greater than the mean of average
expenditure of the beneficiaries. This implies the beneficiaries have some thing to save .
4.3.1.2.3.Income of the Beneficiaries Before joining AdCSI Share

Company
AdCSI Share Company's beneficiaries were asked to tell whether they have income or
not. Accordingly, 90 (59.2 % ) of the sample respondents replied that they have income
before joining the program of AdCSI Share Company whereas the remaining , 62 ( 40.8
% ) of them indicated that they do not have income before joining the program of
AdCSI Share Company . This indicates that though the majority of the sample
respondents have income before joining the program of AdCSI Share Company,
relatively a large number of sample respondents do not have income before joining the
program of AdCSI Share Company. Table 4.9 presents the condition of income of the
respondents before joining program of AdCSI Share Company.
Table 4.8 . The condition of income of the respondents before joining

program of AdCSI Share Company
Did you have any your own income source before joining this credit program?
Frequency Percent
Response of Yes 90 59.2

beneficiaries
No 62 40.8
Total 152
More over , the result from the secondary data also confirms the finding from the sample
respondents . The profile of the beneficiaries shows that the a significant number of the
beneficiaries do not have income (un employed ) before they join the AdCSI Share
Company. This implies that the institution is creating job opportunities for those who do
not have .
4.3.1.2.4. Income of the Beneficiaries after joining program of AdCSI
Share Company
Table 4.9. The income of the respondents after joining program of
AdCSI Share Company
Did your income increase after joining AdCSI Share Company ?
Frequency Percent

beneficiaries
No 36 22.7
Total 152 100.0
As it is depicted in Table 4.9 , the majority , 36 (77.3 %) of the sample respondent

responded that their income has increased after they have joined AdCSI Share
company .The rest , 36 (22.7%) of the sample respondents have replied that their income
after they have joined did not increase . This implies that the majority of the beneficiaries'
income have increased after they have joined AdCSI Share company. More over, the
result from the interview indicates that the income of the beneficiaries has increased after
they have joined the program of AdCSI Share company. This implies that there is an
agreement with the finding from the sample respondents who said their income has
increased after they have joined the program of AdCSI Share company. From this we can
understand that AdCSI Share company. is playing role in the improvement of the income
of the beneficiaries .
4.3.1.2.4. Capacity for Paying Children’s Better Quality of Schooling

Figure 4.3. Evaluation of the capacity of better education for the
children after joining AdCSI
As it can be seen from figure 4.3, regarding their capacity for paying for their children's
better quality schooling after they joined the credit program of AdCSI, 62 (40.8 %) of the
sample respondents replied no change , 69 (45.4 %) of them responded medium while the
rest 21 (13.8%) of the sample respondents said that very high .This implies that, the
majority 69 (45.4 %) of the sample respondents responded their capacity for paying for
their children's better quality schooling after they joined the credit program of AdCSI is
medium .From this we can understand that the institution is contributing at medium level
concerning better quality schooling for the beneficiaries' children.
4.3.1.2.5.The Extent of Affording the Medical Expenses of the

Beneficiaries
Graham Wright argued that microfinance has substantial effect on the nutrition and health
of the poor, especially for children (Wright,2000:3). In view of this the beneficiaries
extent of covering medical expenses is presented in figure 4.4 below.
Figure 4.4.The extent of covering medical expenses of the beneficiaries
As it is presented in figure 4.4, concerning the extent of affording medical expenses after
joining the program of AdCSI S.C, 35 (23 %) of the sample respondents indicated that
their capacity is low , 90 (59.5 %) of them indicated that their capacity is medium , 21
(13.8 %) of the sample respondents replied that their capacity is high while the rest 6 (4
%) of them responded that their capacity is very high . This implies that, the majority 90
(59.5 %) of the sample respondents indicated that their capacity is medium in covering
medical expenses .This indicate that the institution is helping the beneficiaries in
covering their medical expenses on average at medium level .
4.3.1.2.6. The level of fulfilling the socioeconomic Demand of

Respondents' family
Figure 4.5. Meeting socioeconomic demand of the beneficiaries' family
As it can be seen from figure 4.5, regarding the level of fulfilling the socioeconomic
demand of beneficiaries' family after joining the program of AdCSI S .C . , 21 (13.8 %)
of the sample respondents responded that the level of fulfilling the socioeconomic
demand of their family is low, 83 (54.6 %) of them replied medium , 35 ( 23 %) of the
sample respondents indicated that of fulfilling the socioeconomic demand of their
family is high , while 13 (8.6 %) of them said very high . This shows that the majority ,
83 (54.6 %) of the sample respondents replied that the level of fulfilling the
socioeconomic demand of their family is medium. From this , we can understand that the
institution is contributing to the beneficiaries in fulfilling the socioeconomic demand of
their family at medium level .
4.3.1.2.7. The Status of Respondents' Fixed asset

Table 4.10. Fixed asset before and after the beneficiaries engaged in
AdCSI S.C
Did you have fixed property before joining the program of Addis Credit and Saving
Institution Share company ?
Frequency Percent

beneficiaries
No 69 45.4
Total 152 100.0
Do you have fixed and movable asset after joining the program of Addis Credit and Saving
Institution Share company ?
Yes 97 63.8
Response of No 55 36.2
beneficiaries
Total 152 100.0

As it is revealed in Table 4.10, Concerning the status of fixed assets of the beneficiaries
before joining the program of AdCSI S. C, 83 (54.6 %) of the sample respondents replied
that they have fixed asset before joining AdCSI S .C whereas 69 (45.4 %) of them
replied that they do not have fixed asset before joining AdCSI S. C. The finding indicated
that the majority, 83 (54.6 %) of the sample respondents have fixed asset before joining
AdCSI S .C.
Concerning the status of fixed asset after the beneficiaries joining the program of AdCSI
S.C, 97 (63.8%) of the sample respondents responded that they have fixed asset after
they have joined the program of AdCSI S. C whereas, 55 (36.2%) of them responded that
they do not have fixed asset after they have joined the program of AdCSI S. C. The
finding showed that the majority of the beneficiaries have fixed asset after they have
joined the program of AdCSI S. C. This implies that the institution has helped the
beneficiaries in acquiring fixed asset .
In view of this , the respondents were asked to indicate the types of the asset they have
after they joined the program of AdCSI S. C. Accordingly, the assets they have include
house, taxi, sofa , TV, Control Bife .
4.3.2 Findings section 2: The Role of Addis Credit and Saving

Institution S.C in Enhancing the Development of Micro and Small
Enterprises
The second specific objective of the study was ‘ to examine the role of Addis Credit and
Saving Institution S.C in enhancing the development of micro and small enterprises in
Gulele Sub city’.
One of the major objective of AdCSI S.C is to enhance the development of micro and
small enterprise through providing financial and non financial services .
Microfinance is very important for poor people as well as businesses and provides
diversified, dependable and timely financial services to the poor people and existing
business, creates employment, encourages a new business development, and empowers
women or other disadvantaged population groups.
At the MFIs services, the reason behind the massive use of the loan service as compared
to the rest of the services is that most small scale entrepreneurs require funds for starting
up ventures, reinvesting in the existing businesses or overcoming various financial
obligations (Charles, 2003).
4.3.2.1.Role of Microfinance Institutions in Enhancing the Development
of a new Business.
4.3.2.1.1 Type of Business Engaged in
The respondents were asked to indicate the type of business they engaged in , accordingly
the types of business sectors MSE’s participated were in trade sectors 2 (25 %) of the
sample respondents , services sectors , 2 (25 % ) of them and the rest of the sample
respondents are urban agriculture, manufacturing, and the construction sectors 1 (12.5%)
each of the three sectors . The finding is presented in figure 4.6 below.
Figure 4.6. The type of business the beneficiaries engaged in
4.3.2.1.2. The size of the business
Currently, the MSEs operators are categorized in to start up, growing and maturity . This
indicates the size of the business . Accordingly , the sample respondents were asked to
indicate their categories . Table 4.11 presents the response of the respondent.
Table 4.11. The size of business the beneficiaries engaged in
What is the size of your business?

Frequency Percent
Response Start up 3 37.5
growing 4 50.0
maturity 1 12.5
Total 8
As finding in table 4.11 reveals, 3 ( 37.5 %) of the sample respondents are at start up
stage , 4 (50 %) of the sample respondents are at growing stage and 1 (12.5%) of them
are at maturity stage . The finding indicates that the majority of the beneficiaries from
MSEs are at growing stage .
4.3.2.1.3. Source of Finance for Starting the Business
Traditionally, banking sector considers Small industries a risky field of investment due to
reasonably low growth rate of the small firms, firms following informal business
practices, inability of the MSME entrepreneurs to maintain collateral securities, lack of
creditworthiness, relatively high processing cost, and poor flow of information.
Currently the government amends SMEs strategy, with two main objectives. These are
sector to play alleviating poverty and reducing unemployment, and to play its pivotal role
as a base to medium and large scale industry. Thus majority of them have no start up
financial capacity, and needs loans from governmental and non-governmental
organization.
In this regard , the 8 ( 100 %) of the sample respondents confirmed that their source of
finance for starting the business is AdCSI Share company .This implies that AdCSI
Share company is playing great role in financing start up business.
4.3.2.1.4.The Business before Starting the Current Business

One of the role of the microfinance is helping in job creation of its beneficiaries .With
this regard , the sample respondents were asked to tell the business they are engaged in
before starting the current business. Accordingly, their response is indicated in table 4.12
below .
Table 4.12. The business beneficiaries engaged in before starting the
current business
What were you doing before you started the business?
Frequency Percent
Response Unemployed 2 25.0
Employed elsewhere in similar business 4 50.0
working unpaid in family business 2 25.0
Total 8
Source : Survey data, 2015S
As it is revealed in table 4.12, 2 (25.0 %) of the sample respondents replied that before
starting the current business they were unemployed , 4 (50.0 %) of the sample
respondents indicated that before they start the current business they were employed
elsewhere in similar business, whereas 2 (25.5 %) of them were working unpaid in family
business. This finding indicates the majority of sample respondents were unemployed
before starting the current business . This implies that the institution is helping to start
new business .
4.3.2.2. Role of Microfinance Institutions to help Existing Business

Grow or Expansion .
4.3.2.2.1. The Adequacy of Loan from AdCSI Share Company for

Business Expansion
Although, the majority of loan is obtained from AdCSI S.C, the respondents indicated
that there exist a significant gap between demand and supply. 2 ( 25 %) of the sample
respondents described that the loan size in line with their financial requirement for their
enterprises whereas 6 (75 %) of the sample respondents described that the loan size of
AdCSI S.C is not in line with the financial requirements of their enterprise . The existing
lending capacity of AdCSI S.C and demand did not match, there are high demands but
loans given are very less. This also poses its own difficulties on the Development of
MSEs in the Sub city. The finding is presented in table 4.13 below.
Table 4.13.The adequacy of loan from AdCSI S.C for business

expansion of the beneficiaries
Is the loan size of AdCSI S.C in line with the financial requirements of your Enterprise?
Frequency Percent

beneficiaries
No 6 75.0
Total 8 100.0
Source : Survey data, 2015
4.3.2.2.2. The Size of Employees Under the Business before Joining

AdCSI S.C
Table 4.14. The number of employees under the business before using
the program of AdCSI Share Company
Do you have employees before joining in your business?
Frequency Percent

beneficiaries
No 5 65.5
Total 8 100.0
Survey data, 2015
As table 4.14 depicts , 3 (37.5%) of the sample respondents have employees before
starting the new business , while 5 (62.5 %) of the sample respondents do not have
employees before starting the new business. This finding indicates that the majority of the
beneficiaries started new business which shows the role of the institution in helping the
establishment of new businesses as one of the role in enhancing the development of
MSEs.
4.3.2.2..3 .The size of Employees under the Business after Joining AdCSI
S.C
Figure 4.7.The number of employees under the business after the
beneficiaries started using program of AdCSI Share company
As figure 4.7 reveals , 3 (37.5 %) of the respondents have 1-5 employees after they
started using credit program of AdCSI S.C , 3 (37.5 %) of the respondents have 5-10
employees under the business after they started using credit program of AdCSI S.C
while 2 (25.0 %) of them have more than 10 employees under the business after they
started using credit program of AdCSI S.C . The finding indicate that beside self
employment , AdCSI S.C is creating employment opportunities for other un employed in

the sub city . This shows that the institution is helping in job creation for the urban
unemployed people .
4.3.3. Finding Section 3: The kinds of Services and Products provided

by Addis Credit and Saving Institution Share Company In Gulele Sub
City to the Beneficiaries
The third specific objective of the study was " identifying the kinds of services and
products provided by Addis Credit and Saving Institution Share Company In Gulele Sub
city to the target groups/ beneficiaries."
As indicated in the literature review, the degree of which MFIs provide service depends
on whether it takes a minimalist or integrated approach. Accordingly, AdCSI S.C.
follows the integrated approach .
According to the primary and secondary data obtained , the services and products
provided by Addis Credit and Saving Institution Share Company is divided in to financial
and non financial services. Below is the detail of the services provided by the institution .
4.3.3.1. Financial Services

The financial services include saving, loan, insurance fund, managing third party money
and mobile banking .
4.3.3.1.1 Saving
AdCSI S.C provides voluntary and compulsory savings that is the former saving is made
by clients and non clients while the latter saving is done by clients only who are required
to save until the loan repayment is successful completed. As saving habit of beneficiaries
is concerned, they are fully aware of the benefits of saving and are in the state of
implementing it. The sample respondents were asked to indicate whether they have a
saving or not . Accordingly , their response is presented in table 4.15 below.
Table 4.15. The status of beneficiaries' saving
Do you have a saving account ?

Frequency Percent

beneficiaries
No - -
Total 152 100.0
As can be seen from table 4.15 , 152 ( 100 %) of the sample respondents have saving .
This shows that AdCSI S.C encourages saving habit of its beneficiaries . Saving
contributes to the sustainability by providing financial security through revolving funds
independently from outside resources. This is consistent with the policy of the institution
as well as the national policy of the country .
The finding from the interview 15 ( 100%) also confirm that all beneficiaries have
saving account at AdCSI Share Company . The number of savers as well as the value of
saving has increased. This is due to the fact that the institution has established system
with regard to saving through availing voluntary and compulsory saving .
4.3.3.1.2 Loan
Loan is another financial service provided by AdCSI Share Company . Depending up of
the nature of the business, the loan products are characterized in to term loan and
installment loan Term loan is a type of loan disbursed and collected within a given time,
which have gestation period; while for installment loan collection of payment is made
monthly. Loan can be provided for the purpose to start and expand business.
I. Type of Loan Products

According to the data obtained from the secondary documents and interview results ,
there are four types of loan products such as micro business loan sometime called general
loan, small business loan, micro lease and housing loan.
Table 4.16 Micro and Small businesses loan
No Type of loan & business area Loan ceiling on the level of enterprises stage of growth
Start up Growth Maturity

1 micro business loan
- for industry 50,000 85,000 100,000
-for services 30,000 40,000 50,000
2 small business loan
- for industry 150,000 500,000 1.5 million
-for services 60,000 200,000 500,000
3 Agriculture related businesses 50,000 100,000 350,000
Source : AdCSI S.C, 2015
Micro business loan product has a nature of installment and it is disbursed for this type of
loan ranges from 30,000 birr to 100,000 birr. The second type of loan is small business
loan, disbursed relatively for well established businesses and technical and vocational
school graduate students who want to enter in to productive ventures and the size of the
loan is usually greater than 60,000 birr and less than 1.5 million birr for each
entrepreneur. Micro lease loan disbursed for the purchase of machines according to the
choices of clients. This type of loan is rendered mostly to people who are organized in to
cooperatives. Housing loan product is to enable clients construct a new house or complete
a construction in progress. The maximum loan size is 350,000 birr with loan term of 60
months (or 5 years) and repayable monthly.
For other types of loans , the initial for short term loan is 30,000 and for other than these
700 and their loan ceiling are:
-Short term loan up to 250, 000 birr

-for purchasing house, renewal
and construction of new house up to 350,000 birr
-for car purchase up to 500,000 birr
-for personal affairs up to 20,000 birr
-for other income generating businesses up to 1.5 million birr
With regard to the amount of loan size , respondents were asked to describe their
feeling about the amount of loan size given by Addis Credit and Saving Institution
relative to their demand. Accordingly , their response is indicated in the figure 4.8.
below.
Figure 4.8. The size of loan in relation to the demand of the beneficiaries
Sou
rce : Survey
data, 2015
Figure 4.8,
depicts that 12
(8 .3 %) of the sample respondents described that the amount of loan in relation to their
demand is very low, 24 (16.7 %) of them replied that the amount is low, 31 (21.5 % )
of the sample respondents indicated that the amount is medium and the rest 67 (46.5%)
of them replied that it is enough . The finding indicates that the majority of the sample
respondents are satisfied by the amount of the loan provided by AdCSI Share company.
Concerning interest on loan and the level of interest rate , the sample respondents were
asked whether they pay interest and the level of its rate . Accordingly , their response is
depicted in Table 4.17 below .
Table 4.17. Response on payment of Interest on loan and its rate level
Do you pay interest for the loan?
Frequency Percent
Response Yes 152 100.0

No - -
Total 152 100.0
What is your opinion about the level of interest rate?
High 118 77.6
Response Medium 34 22.4
Low - -
Total 152 100.0
As table 4.17 reveals , regarding paying interest on loan, 152 (100 %) of the sample
respondents indicated that they pay interest on loan . The result shows that AdCSI Share
company is rendering loan service on interest rate .This is helpful for financial
sustainability of the institution.
With regard to the level of interest rate on loan , 118 (77.6 %) of the sample respondents
responded that the interest rate level on loan is high whereas the remaining 34 (22.4 %)
of the sample respondents replied that the level of interest rate on loan is medium .The
finding indicates that the level of interest rate on loan is not encouraging the beneficiaries
so as to take the loan for their intended purpose as it is high . Hence, the institution need
to revise its interest rate policy on loan .
4.3.3.1.3. Insurance Services

The result through 13 ( 86.7%) interview and secondary data obtained from the
institution indicates that there are different kinds of insurance services rendered by
AdCSI S.C. These include credit life insurance, business insurance, property insurance
and insurance premium. Credit life insurance is similar to a special type of life insurance
called “decreasing term” insurance. A credit life policy is issued for an amount equal to
how much you owe. As your loan balance decreases, so does the face amount of the
credit life policy. If you die before the loan is fully repaid, the policy pays the lender an
amount equal to what you still owe at that time.
Business insurance : These are coverage options available to protect just about every
aspect of business from employee injury to natural disasters. Obtaining the right type and
amount of insurance for business will help to avoid gaps in coverage where one need it
most.
Property insurance is insurance that protects the physical property and equipment of a
business against loss from theft, fire or other perils. Insurance premium is amount of
money that an individual or business must pay for an insurance policy. The insurance
premium is considered income by the insurance company once it is earned, and also
represents a liability in that the insurer must provide coverage for claims being made
against the policy. To write off the loan, in case of death of a client, the client is required
to pay 1% up front as insurance premium of the loan for the year, and 1% of the
outstanding balance for the coming year, if any.
4.3.3.1.4. Third Party Fund Administration

Third party fund administration is service which is rendered for the community on behalf
of the third party so as to reach the community where they are .Currently , the
institution is giving the service at sub branch level . The service include paying pension
trust and salary for solid waste collectors at wereda level.
4.3.3.1.5. Mobile Banking

This is the most recent service provided by AdCSI S.C. Mobile Banking services enable
to access accounts, make fund transfers, payments and balance inquiries as well as get
instant notifications on all clients accounts .
The result of interview indicates that the service is started recently so as to reach the
services of the institution to the community easily where they are which saves the time,
energy and money of the beneficiaries . The institution is working hard to promote the
service to the community since it is new service .
4.3.3.2 Non Financial Services

The non financial service include consultancy , micro lease , business development
training (BDT) ,
4.3.3.2.1. Consultancy
The institution give consultancy services to the beneficiaries before they get loan. The
consultancy service is about the loan service, usage , benefit of saving , business plan
development , managing money, financial management and about the success of a
business .As the interview result indicates, the beneficiaries are benefited a lot from the
consultancy services. All the beneficiaries get this services before getting any other
services .Hence the consultancy service is the key for other services provided by AdCSI
Share company .
4.3.3.2.2.Micro Lease Loan

Micro lease loan disbursed for the purchase of machines according to the choices of
clients. This type of loan is rendered mostly to people who are organized in to association
( MSE operators) . The beneficiaries will pay the amount of the machine at down
payment and when completed the machine will be transferred to the beneficiaries . The
machine will be in the name of the institution until the full payment is completed . As the
finding from the interview shows, the service is creating capacity to enterprises to be
owner of different machineries which are high cost by paying the amount through long
term payment . Currently , the service is getting wider and wider so that the institution
has planned to organize it in to separate department so as to manage the demand of the
service .
4.3.3.2.3. Business Development Training ( BDT)
Every member of every organization must have the necessary business skills to achieve
the company goals and implement business strategies set forth by the executives. AdCSI
Share company give trainings related to business skills, like business management,
financial management, bookkeeping , conflict resolution and developing business plan .
The out come of the interview reveals the existence of business development training by
the institution. The training has helped the beneficiaries to manage their business,
Conflict resolution ,among the group members and preparing business plan .
4.3.4.Findings Section 4:The Major Challenges which affect the

performance of Addis Credit and Saving Institution Share Company in
Gulele Sub City
The fourth specific objective of the study was " identifying the major challenges which
affect the performance of Addis Credit and Saving Institution Share Company In Gulele
Sub city". Though the strengths of the Micro Financing Industry outweigh its
weaknesses, there are still big challenges facing the microfinance institutions. The major
challenges of AdCSI S.C are classified in to two broad categories . These are the
Institution side and the beneficiaries side .
4.3.4.1.From the Institution Side

From the institution's side , financial challenges, management challenges and lack of
technologies ,
4.3.4.1.1. Financial Challenges

Financial challenge is one of the challenges from the institution side . With regarding to
this , respondents are asked to indicate whether financial challenge exist or not .
Accordingly , their response is presented in table 4.18 below.
Table 4.18. Response on existence of financial challenges
Is there financial challenges ?
Frequency Percent
Response Yes 152 100.0

No - -
Total 152 100.0
As table 4.18 reveals, 152 (100%) of the sample respondents indicated the existence of
financial challenge, which affects the Performance of AdCSI S.C in the Sub city.
The financial challenge of Micro finance institutions include high interest rate, shorter
repayment period , low interest rate for saving and low amount of loan .The detail is
discussed as follows :
I. High Interest Rate on loan
The beneficiaries of Microfinance Institution pay interest for the loan they took . This
lending institution is organized for the purpose of giving loans for beneficiaries . But as
mentioned in the table 4.17 the beneficiaries were affected by high interest rate of loans
given by this institution because 118 (77.6 %) of the sample respondents indicated that
the interest rate level on loan is high. Similarly, 118 (77.6 %) of the sample respondents
have indicated that high interest on loan is one of the financial challenges. This indicate
the institution need to revise the policy on interest rate for loan as it affects the
beneficiaries not to borrow for their intended purpose .
II. Shorter Repayment Period
Most of the respondents indicated that the time period for repayment of loan is short . At
the time of repayment there has to be time for some times up to the business adapt the
environment . Due to lack of time , some beneficiaries are forced to close the business
because the business is not in the position to continue any more. This put an extra
pressure on the client. The client lose his time as well as some money in his business.
On the other hand , the result of interview indicate that the time period for repayment of
loan is not short it is different for different types of loan .The result from the sample
respondents and the interviewees is not consistent .This indicate there is no consensus
between the institution and the beneficiaries regarding the loan repayment period .Hence
the institution need to discuss the problem with the beneficiaries and take the necessary
measure accordingly .
III. Low Interest Rate for Saving
Interest rates determine the amount of interest payments that savers will receive on their
deposits. An increase in interest rates will make saving more attractive and encourage
saving. Table 4.19 presents the level of interest rate on saving.
Table 4.19. Response on the level of interest rate on saving
What is your opinion about the level of interest rate on saving?
High - -
Response Medium 44 28.9
Low 108 71.1
Total 152 100.0
Table 4.19 indicated that 44 (28.9 %) of the sample respondents replied the interest rate
on saving is medium , the majority 108 ( 71.1 %) of the sample respondents replied that
the interest rate on saving is low. This shows that the interest rate on saving is low. This
implies that it is one of the financial challenges as it discourage the beneficiaries to save.
IV. Low Amount of Loan

As indicated in figure 4.5, though the majority of the respondents are satisfied with loan
amount, there are a significant number of beneficiaries who are not satisfied with loan
amount provided by AdCSI S.C . The challenge more for those engaged in MSEs.
V. Lack of Cash Management Skills
Business management quality, educational level, and experience on the business issues
also have their own impact on performance of Micro finance institutions. MFIs must
have a sound Management structure to ensure that client deposits are not at risk . With
regard to this , 32.4 % of respondents have agreed the existence of lack of cash
management skills.
Other challenges most commonly cited are lack of knowledge about microfinance
services, weak governance and management capacities for further developments, less
attention and emphasis on the financial sustainability of MFIs..
4.3.4.1.2. Management Challenges

The managerial challenges are lack of clear division of duties and responsibilities among
employees, poor organization and ineffective communication and lack of well trained
and experienced employees.
I. Lack of Clear Division of Duties and Responsibility among Employees
Every business unit and team needs to understand its role. Managers and leaders need to
develop a clear and communicated purpose that is both compelling and that makes
members feel important. Understand that employees are more likely to be committed to
the purpose of the unit or team if they are involved in creating it. An unclear mission will
result in a lack of focus and a low level of “engagement” and commitment toward
achieving it.
According to the interview result , lack of clear division of duties and responsibilities
among the employees is one of the challenges of AdCSI S.C particularly at the sub
branches . This indicates the institution should have clear division of duties and
responsibility among the employees so as to achieve its mission .
II. Poor Organization and Ineffective Communication
Communication in organizations encompasses all the means, both formal and informal,
by which information is passed up, down, and across the network of managers and
employees in the organization . The challenge for businesses is to channel these
communications to improve customer relations, increase employee satisfaction, build
knowledge-sharing throughout the organization, and most importantly, enhance the firm's
competitiveness.
In this regard, the response from the sample respondents and the result from the interview
indicated that poor organization and ineffective communication is one of the challenges
of AdSCSI S.C . This challenge is more observed at the sub branch level . From this
finding we understand that the institution has poor organization and weak communication
. lack of good interpersonal communication skills is one of the reason for having
ineffective communication .
III. Lack of Well Trained and Experienced Employees
Lack of skilled personnel is one of major challenges of AdCSI S.C. The finding from
the interview reveals that, there is lack of skilled manpower in the institution .This is
expressed in terms of lack of skills like creativity ,adaptability and technical expertise ,
lack of the necessary experience and poor cultural fit with the organization . This
situation is more exacerbated by high turnover of experienced personnel either for the
need of better jobs or hate to work in stress work condition with minimal facilities
provided. The problem is relatively serious at sub branch level .The Hence the institution
need to rethink how to hire junior workers into positions requiring more tenure and
experience, and determine what additional training will be necessary for the new .
4.3.4.1.3. Technological Challenges

I. Problem of Using Modern Core Finance Technologies
An appropriate MIS is essential to ensure that client deposits are not at risk .There is a
problem of using modern core finance technologies in AdCSI Share company. As the
interview result indicates , AdCSI Share Company uses manual working methods which
leads to clerical errors , non standardized reporting and performance monitoring system.
In addition to the interview result , the personal observation of the researcher also
confirm that the institution has lack of using technology ,even in the office there is no
more than one computer . Most of the works are manual . This has negative impact on the
achievement of the institution's goals, vision and mission .
4.3.4.2. From the Beneficiaries Side
4.3.4.2.1. Credit Default

With regard to loan repayment , the finding from the interview indicates that credit
default is one of the major challenges the institution facing . The beneficiaries, specially
group borrowers are reluctant to repay the loan within the stipulated time . Even they say
to the extent that " the money is the government's money , so it should be given for free
for us ." Despite this, the institution is working hard to raise the awareness of the
beneficiaries and bring attitudinal change as well as carrying out a continuous follow up
and controlling of the loan repayment .
4.3.4.2.2 Using the Loan for un Intended Purpose

The interview out come indicated that the beneficiaries use the loan for the un intended
purpose. This emanates with lack of awareness, lose criteria for selecting the clients, lack
of continuous follow up of the use of loan .
4.4. Interpretation and Discussion

This section provides an interpretation and discussion of the observation made in the
results section in line with the earlier published works. And the results are interpreted as
showing how they agree or disagree with other literatures. Thus, all specific objectives of
the study discussed one by one as follows.
4.4. 1. The Social and Economic Role of Addis Credit and Saving
Institution Share Company to the Beneficiaries in Gulele Sub City
The first specific objectives of the study was ‘to assess the social and economic role of
Addis Credit and Saving Institution Share Company to the beneficiaries in Gulele Sub
city” . To this end, the social role of microfinance institution (the role of MFI on the
development of human capital, and social capital ) and Economic role of MFI (the
condition of the income ,expenditure of beneficiaries, the capacity to better quality
education to children, the capacity to health and to fulfill the socioeconomic demand of
the beneficiaries' family ) were discussed under this specific objective.
Concerning Human Capital, it includes household members' knowledge, skill and

capability to improve their day to day living conditions. Regarding training provided by
AdCSI S.C., 97 (63.8 %) of respondents had been trained in business development and
management, basic short computational and skills training, conflict resolution among
centers & groups and other awareness creation about crosscutting issues whereas 55
(36.2% ) of the respondents were not participated on training. Though the majority of the
beneficiaries have taken training, a significant level of the beneficiaries lack skills in
business development and management, conflict resolution among centers and groups
and the likes .
Regarding the significance level of the training , as it presented table 4.4 , the majority ,
40 (41.2 % ) from those who have taken the training indicated that the training is
Significant , 31 (32 %) of respondents among those who have taken the training
described Very significant, 18 (18.6 % ) of them indicate less significant while the rest
8 (8.2 %) of the respondents who have taken the training responded not significant .
Though the majority of the sample respondents who have taken the training described the
training is significant , a significant number of them also indicated the level of the
training is less significant and not significant . This implies that the quality of the
training might have some problem . So, the institution should give due emphasis to the
training given to the beneficiaries.
Social capital can be expressed in terms social network, trust and solidarity, cooperation
and support. According to Augusto and Ferriera (2007), current microfinance institutions
shouldn't only come demonstrate the impact of their service towards financial wealth, but
social benefits to the community be supposed to come together.
With regard to this , the role of MFI on development of social capital i.e . social
grouping , Advantages of social grouping and Benefit gained by beneficiaries from
their social grouping were discussed. The finding revealed that the majority of the
respondents pointed out their social grouping is helping them in sharing of ideas,
gaining experience of business and life , and further for sharing of local goods in the case
of social celebrations created among them . They get together in different social
ceremonies and have their own regulation. Concerning benefits gained from their social
grouping 28 (27 %) of respondents among those who have social grouping or
association responded that the benefit is very significant, 61 (58.7 % ) of respondent
indicated the benefit is significant and the rest , 19 (18.3 %) of them said the benefit is
less significant.( Table 4.5 & 4.6 )
Further more, the result obtained from the interview confirmed that the beneficiaries
contribute regular money which they use for the support of different social ceremonies
among them like 'Edir' which help local market association in selling and accessing the
wholesalers .Through their own saving system , the beneficiaries cooperate by giving a
prior loan chance to the most disadvantaged member of the group, their association
helped them to share all the challenges and opportunities of business and life . They get
together in every social ceremony and when one member of the beneficiaries faces risks
in her/his business affairs, the others cooperate by covering her/ his loan and thereby
saving her from moral problems.
From this we can understand that the institution has a significant role in helping the
beneficiaries from the wider perspective regarding the social condition of the
beneficiaries . This should be further strengthened so as to address the social problems of
the beneficiaries in manner that accommodate the low income group of the sub city .
The other dimension which the first specific objective addressed was the economic role
of microfinance institution. To this effect, average income of the beneficiaries , average
expenditure of the beneficiaries , the income of the beneficiaries prior and after joining
AdCSI Share Company , capacity for paying children’s better quality of schooling , the
extent of affording the medical expenses of the beneficiaries , the level of fulfilling the
socioeconomic demand of the beneficiaries' family and the status of respondents' fixed
asset were discussed .
Regarding the income of the respondents , as it is indicated in figure 4.1, 7 (4.6%) of the
sample respondents have average income of less than 500 birr, 35 ( 23%) of the sample
respondents' average income is 501 -1000 birr and similarly , 35 ( 23 %) of the sample
respondents average income is 2001-4000 birr , 21 (13.8%) of the sample respondents
average income is 1001-2000 , and the majority, 54 (35.6%) of the respondents' average
income is 4001-10,000 . This shows that the majority of the sample respondents have
average monthly income of 4001-10,000 .This result is consistent with that of Moser
( 1998 ) , which states that the increase or decrease in the level of income may have an
education, a means to fulfill basic needs and own assets.
Concerning the average expenditure of the sample respondents , as it is presented in

figure 4.2 , 21 (13.8 %) of the sample respondents have average expenditure of less than
500 birr, 48 (31.6 %) of the sample respondents' average expenditure is 501 -1000 birr
and similarly , 48 (31.6 %) of the sample respondents' average expenditure is 2001-
4000 birr , 21 (13.8%) of the sample respondents' average expenditure is 1001-2000 ,
and the rest 14 (9.2 %) of the sample respondents' average expenditure is 4001-10,000 .
This implies that the majority of the sample respondents have average monthly
expenditure of 501 -1000 and 2001-4000 .
Based on the results from the average income and the average expenditure , we can
understand that the beneficiaries have something that they save covering their costs as
the majority of respondents' average monthly income is 4001-10,000 and their monthly
expenditure is 501 -1000 and 2001-4000 .
More over , table 4.7 revealed that the mean of average income of the beneficiaries is
3,071.43 whereas the mean of average expenditure is 2,315.18 . This finding indicates
that the mean of average income is greater than the mean of average expenditure of the
beneficiaries. This also implies the beneficiaries have some thing to save by covering
their expenditure so that they can use it for productive purposes that help to improve their
living standard .
With regard to income of the beneficiaries prior and after they joined AdCSI S.C, table
4.8 indicated that 90 (59.2 % ) of the sample respondents have income before joining
the program of AdCSI S .C whereas the remaining , 62 ( 40.8 % ) of them do not have
income prior joining the program of AdCSI S . C . More over , the result from the
secondary data also confirmed the finding from the sample respondents . The profile of
the beneficiaries showed that a significant number of the beneficiaries did not have
income ( were un employed ) before they join the AdCSI S.C. This indicates that though
the majority of the sample respondents have income prior joining the program of AdCSI
S .C, relatively a large number of sample respondents did not have income before
joining the program of AdCSI S.C. This implies that AdCSI S.C. is creating job
opportunities for the unemployed which has a significant role in the reduction of the
prevailing urban un employment problem in the sub city .
As explained in table 4.9 the majority , 36 (77.3 %) of the sample respondents' income
has increased after they have joined AdCSI S.C .The rest , 36 (22.7%) of the sample
respondents' income did not increase . This result implies that the majority of the
beneficiaries' income have increased after they have joined AdCSI S.C. given the impact
of inflation , it helps to improve their socio economic condition.
More over, the result from the interview indicated that the income of the beneficiaries
has increased after they joined the program of AdCSI S.C. This shows that there is
agreement with the finding from the respondents which indicates the income of the
sample respondents have increased after they have joined the program of AdCSI S.C. The
finding also consistent with the finding of Itana ( 2002), which indicated that " at the
household level , participant in micro financing leads to increased income , asset and
welfare in terms of food security , housing and health ."
In a study by Chowdhury and Bhuiya (2004) as cited in Fleke (2011) from Bangladesh,
it is observed that there is a better educational performance of children after beneficiaries
joined the Microfinance institution. In similar line , Orbuch (2011), accredits that the
social service provided by microfinance contribute to the growth of human development.
Educational services including trainings contribute to the overall awareness promotion of
the beneficiaries, thereby making them productive in their life. In addition, it also equips
them with the fundamental skills as to how to set selling prices, purchase goods and
calculate properly their costs and benefits. This in turn contributes to the growth of their
income benefit and guarantees the institutions with the return of their loans.
Further more , Kahna and Rahaman (2007) research at MF, indicated that spreading the
access of education throughout the society is another critical goal of all Micro Finance
Institutions. Besides, eliminating level of poverty, illiteracy and disease and contributing
to human development is the mission of Micro finance and has a goal of expanding
educational opportunities . In this regard , the finding in figure 4.3 indicated that, 62
(40.8 %) of the sample respondents indicated no change in their capacity of paying for
their children's better quality schooling , 69 (45.4 %) of them described medium while
the rest 21 (13.8%) of the sample respondents have very high capacity .This result
shows that, the majority 69 (45.4 %) of the sample respondents have medium capacity
of paying for their children's better quality schooling after they joined the credit program
of AdCSI S.C . From this we can understand that AdCSI S. C is playing role at medium
level concerning better quality schooling for the beneficiaries' children.
Concerning the capacity of the beneficiaries in covering the medical expenditure of their
family , figure 4.4 revealed that after joining the program of AdCSI S. C, 35 (23 %) of
the sample respondents have low capacity , 90 (59.5 %) of them have medium capacity,
21 (13.8 %) of the sample respondents have high capacity while the rest 6 (4 %) of
them have very high capacity. This implies that, the majority 90 (59.5 %) of the sample
respondents have medium capacity in covering medical expenses of their family .This
indicate that AdCSI S .C playing role at medium level in covering the beneficiaries'
family medical expenses. The finding is consistent with the Wright (2000) , argument of
microfinance has substantial effect on the nutrition and health of the poor, especially for
children .More over, Achamyeleh(2011) in his research on DECSI concluded that the credit
taken shows a positive correlation with the improvement of child nutrition and their health
condition .
As it is presented in figure 4.5, 21 (13.8 %) of the sample respondents have low level of
capacity in fulfilling the socioeconomic demand of their family, 83 (54.6 %) of them
have medium level of capacity , 35 ( 23 %) of the sample respondents have high level
of capacity in fulfilling the socioeconomic demand of their family, while 13 (8.6 %) of
them have very high . The result shows that the majority , 83 (54.6 %) of the sample
respondents have medium level of fulfilling the socioeconomic demand of their family.
From this finding , we can understand that AdCSI S.C is contributing to the beneficiaries
at medium level in fulfilling the socioeconomic demand of their family.
The last part discussed under the first specific objective was about the status of
beneficiaries asset prior and after they joined AdCSI S. C. Table 4.10 indicated that 83
(54.6 %) of the sample respondents have fixed asset before joining AdCSI S.C whereas
69 (45.4 %) of them did not have fixed asset before joining AdCSI S. C. The finding
indicated that the majority, 83 (54.6 %) of the sample respondents have fixed asset before
joining AdCSI S. C.
Concerning the status of fixed asset after the beneficiaries joining the program of AdCSI
S .C, 97 (63.8%) of the sample respondents have fixed asset after they have joined the
program of AdCSI S .C whereas, 55 (36.2%) of them do not have fixed asset after they
have joined the program of AdCSI S .C. This finding shows that the majority of the
beneficiaries have fixed asset after they have joined the program of AdCSI S. C. From
this we understand that the institution is helping beneficiaries to be owner of fixed assets.
The assets of the beneficiaries include house, taxi, sofa , TV, Control Bife.
4.4.2 .The Role of Addis Credit and Saving Institution Share Company
in Enhancing the Development of Micro and Small Enterprises (MSEs)
The second specific objective of the study was ‘ to examine the role of Addis Credit and
Saving Institution S.C in enhancing the development of micro and small enterprises in
Gulele Sub city’.
There are two contesting approaches among microfinance supporters: business approach
and development approach. According to Maanen (2004), business approach primarily
focused on organizational achievements such as repayment, cost recovery and
profitability. Hence, their concern is ‘how to develop the industry’ rather than how to
develop the community. On the other side, development approach emphasis more on
break even, impact on credit and on how the client is doing rather than profitability.
Supporters of this approach argue that the clients should participate in awareness and
capacity building programs before taking their loans
To this end , the role of microfinance institutions in enhancing the development of a
new business ( the type of business engaged in , the size of the business, source of
finance for starting the business , the business before starting the current business ) and
Role of microfinance institutions to help existing business grow or expansion (The
adequacy of loan from AdCSI Share Company for business expansion, the size of
employees under the business prior and after joining AdCSI S.C ) were discussed
under the second specific objective.
diversified, dependable and timely financial services to the poor people and existing
business, creates employment, encourages a new business development, and empowers
women or other disadvantaged population groups.
The sector in which MSEs operate helps to explain its growth ,controlling for the
influence of other factors . From the theoretical perspective , it is likely that firms in
different sectors would face different product demands and encounter different cost
structures on the supply side and different evidence of differences in growth rates is quite
extensive (Liedholm, 2001).
Regarding the type of business sectors the beneficiaries ( association or MSEs operators)
involved , figure 4.6 revealed that 2 (25 %) of the sample respondents were involved in
trade sector , 2 (25 % ) of them were in services sectors and the rest , 1 ( 12.5% ) of the
sample respondents for each of the three sectors were involved in urban agriculture,
manufacturing, and the construction sectors. From this finding we can understand that the
majority of the beneficiaries are involved in trade and service sectors .However , AdCSI
Share Company should give emphasis for manufacturing sector as it is the sector which
the government gives priority for the achievement of the middle income goal of the
country by 2025. More over, before MSEs to engage in different sectors , there should be
a feasibility study and evaluated thoroughly to identify the sector which has a potential
to grow .
Smaller enterprises at start up register high growth rates than their larger counter parts .
This can theoretically be explained by the existence of diminishing returns to scale . This
is because younger firms need to rapidly achieve the minimum efficiency size ( Astede,
2008) .
Regarding the size of business , the finding in table 4.11 indicated that 3 ( 37.5 %) of
the sample respondents are at start up stage , 4 (50 %) of the sample respondents are at
growing stage and 1 (12.5%) of them are at maturity stage . The finding indicates that the
majority of the beneficiaries of AdCSI S.C from MSEs are at growing stage . This stage
requires much support from different stakeholders of MSEs. Thus, this implies AdCSI
S. C is discharging its responsibility as far as the size of business is concerned .
Traditionally, banking sector considers Small industries a risky field of investment due
to reasonably low growth rate of the small firms, firms following informal business
practices, inability of the MSME entrepreneurs to maintain collateral securities, lack of
creditworthiness, relatively high processing cost, and poor flow of information.
Currently the government amends SMEs strategy, with two main objectives. These are
sector to play alleviating poverty and reducing unemployment, and to play its pivotal role
as a base to medium and large scale industry. Thus majority of them have no start up
financial capacity, and needs loans from governmental and non-governmental
organization. In line with this , (Mulu , 2007) indicated that MSEs which have access to
capital or credit grew better than those which have shortage of capital or credit and
solving this problem leads to solution of unemployment and MESs growth .
In connection with this , concerning the source of finance to start business , 8 ( 100 %) of
the sample respondents confirmed that their source of finance for starting the business is AdCSI
Share company .This finding shows that AdCSI S. C is playing great role in financing start up
business.
With regard to the beneficiaries' status prior engaged in the current business , table 4.12
revealed that 2 (25.0 %) of the sample respondents were unemployed before starting the current
business, 4 (50.0 %) of the sample respondents were employed elsewhere in similar business
before they start the current business , whereas 2 (25.5 %) of them were working unpaid in family
business. In this regard , Rogal (1999) , expressed that MFIs offer enterprise development
facilities by assisting people, individually and in groups, to access financial services to
start and grow enterprises which can sustain them and their families above the poverty
line.
This finding indicates that AdCSI Share company playing role to start new business.
The unemployed, those working unpaid in family business and those who were working
in other similar business by salary or wage also have got chance to get better job
compared to the previous .
This result is consistent with that of Itana ( 2002) , which indicated at enterprise level ,
participation in micro financing is expected to lead increased net worth, net cash flow and
increased differentiation between the micro enterprise and the household , while at the
community level , it is expected to lead to increase in paid employment of community
members.
Concerning the adequacy of the loan from AdCSI S.C, although the majority of loan is
obtained from AdCSI S.C., table 4.13 indicated that there exist a significant gap
between demand and supply. 2 ( 25 %) of the sample respondents described that the loan
size in line with their financial requirement for their enterprises whereas 6 (75 %) of
the sample respondents described that the loan size of AdCSI S.C is not in line with the
financial requirements of their enterprise. The existing lending capacity of AdCSI S.C
and demand did not match, there are high demands but loans given are very less. This
also poses its own difficulties on the development of MSEs in the Sub city. Hence ,
AdCSI S.C in Gulele Sub city need to increase its supply of loan as per the demand of the
beneficiaries of MSEs operators or associations .
Regarding the number of employees under the business prior and after joining AdCSI S.
C , table 4.14 depicted that 3 (37.5%) of the respondents had employees before starting
the new business , while 5 (62.5 %) of the sample respondents did not have employees
before starting the new business. This finding indicates that the majority of the
beneficiaries did not have employees before starting the new business.
More over , figure 4.7 indicted that 3 (37.5 %) of the respondents have 1-5 employees
after they started using credit program of AdCSI S.C, 3 (37.5 %) of the respondents
have 5-10 employees under the business after they started using credit program of
AdCSI S.C while 2 (25.0 %) of them have more than 10 employees under the business
after they started using credit program of AdCSI S.C .From the two findings we can
understand that AdCSI S.C is playing its role in job creation for the urban unemployed
people in the Sub city which is one of urban problems. Hence , the institution is
achieving one of its goal .
4.4.3 .The kinds of Services and Products Provided by Addis Credit and
Saving Institution Share Company in Gulele Sub City to the
Beneficiaries
The third specific objective of the study was " identifying the kinds of services and
products provided by Addis Credit and Saving Institution Share Company In Gulele Sub
city to the beneficiaries."
The services and product of Microfinance institutions are based on whether it is the
minimalist or integrated approaches . According to the primary and secondary data
obtained , the services and products provided by Addis Credit and Saving Institution
S.C follows the integrated approach i.e. financial and non financial service and products
are provided to the beneficiaries .
The financial services provided by Addis Credit and Saving Institution Share Company
include saving , loan , insurance services , third part fund administration and mobile
banking .On the other hand , the non financial services provided by Addis Credit and
Saving Institution Share Company include consultancy , micro lease loan and business
development training ( BDT) .
4.4.3.1.Financial Services
I. Saving
As it is indicated in the finding , AdCSI S.C provides voluntary and compulsory savings
that is the former saving is made by clients and non clients while the latter saving is done
by clients only who are required to save until the loan repayment is successfully
completed. As saving habit of beneficiaries is concerned, they are fully aware of the
benefits of saving and are in the state of implementing it.
As table 4.15 revealed , 152 ( 100 %) of the sample respondents have saving . The
finding from the interview also confirm that all beneficiaries have saving account at
AdCSI S.C . The number of savers as well as the value of saving has increased. This is
due to the fact that the institution has established system with regard to saving through
availing voluntary and compulsory saving This shows that AdCSI S.C encourages saving
habit of its beneficiaries . Saving contributes to the sustainability by providing financial
security through revolving funds independently from outside resources. This is consistent
with the policy of the institution as well as the national policy of the country .
II. Loan
Loan is another financial service provided by AdCSI Share Company . Depending up of

the nature of the business, the loan products are characterized in to term loan and
installment loan Term loan is a type of loan disbursed and collected within a given time,
which have gestation period; while for installment loan collection of payment is made
monthly. Loan can be provided for the purpose to start and expand business. According
to the data obtained from the secondary documents and interview results , there are four
types of loan products such as micro business loan sometime called general loan, small
business loan, micro lease and housing loan (table 4.16)
Micro business distributes for loan ranges from 30,000 birr to 100,000 birr , small
business loan distributes usually greater than 60,000 birr and less than 1.5 million birr for
each entrepreneur whereas housing loan product has maximum loan size of 350,000 birr
with loan term of 60 months (or 5 years) and repayable monthly.
In addition to these four major loans, other types of loans , the initial for short term loan
is 30,000 and for other than these 700. The loan ceiling for Short term loan is up to
250, 000 birr, for purchasing house, renewal and construction of new house up to
350,000 , for car purchase up to 500,000 birr , for personal affair up to 20,000 birr and
for other income generating businesses up to 1.5 million birr.
Regarding the amount of loan size figure 4.8 indicated that 12 (8.3 %) of the sample
respondents described that the amount of loan in relation to their demand is very low, 24
(16.7%) of them described that the amount is low, 31 (21.5 % ) of the sample
respondents indicated that the amount is medium and the rest 67 (46.5 % ) of them
replied that it is enough . The finding indicates that the majority of the respondents are
satisfied by the amount of the loan provided by AdCSI S. C. This finding is not
consistent with the finding of beneficiaries who are engaged in MSE which is discussed
under specific two . From these two findings we understand that the beneficiaries who are
involved in MSE need more amount of loan for the operation of their business .There fore
, AdCSI S.S need to consider the difference and render the loan accordingly Concerning
paying interest on loan , table 4.17 revealed that 152 (100 %) of the sample respondents
indicated that they pay interest on loan .The result shows that AdCSI S.C is rendering
loan service on interest rate. This is helpful for financial sustainability of the institution.
More over, table 4.17 revealed that 118 (77.6 %) of the sample respondents expressed
the interest rate level on loan is high whereas the remaining 34 (22.4 %) of the sample
respondents described the level of interest rate on loan is medium .This finding indicates
that the level of interest rate on loan is not encouraging the beneficiaries so as to take the
loan for their intended purpose as it is high .This outcome is consistent with the one
described under challenges of MFI , where the interest rate on loan is described as one
of the challenges of MFI by the respondents and the interviewees . Hence, the institution
need to revise its interest rate policy on loan as it has adverse effect on the beneficiaries
to borrow the money from AdCSI S.C for their intended purpose
III. Insurance Services
As the finding of interview and secondary data obtained from the institution indicated ,
there are different kinds of insurance services rendered by AdCSI S.C. These include
credit life insurance, business insurance, property insurance and insurance premium.
Credit life insurance is similar to a special type of life insurance called “decreasing
term” insurance. A credit life policy is issued for an amount equal to how much you owe.
As your loan balance decreases, so does the face amount of the credit life policy. The
second one which is Business insurances are coverage options available to protect just
about every aspect of business from employee injury to natural disasters. The third one is
Property insurance which protects the physical property and equipment of a business
against loss from theft, fire or other perils.
The fourth one is insurance premium which is amount of money that an individual or
business must pay for an insurance policy. The insurance premium is considered income
by the insurance company once it is earned, and also represents a liability in that the
insurer must provide coverage for claims being made against the policy. To write off the
loan, in case of death of a client, the client is required to pay 1% up front as insurance
premium of the loan for the year, and 1% of the outstanding balance for the coming year,
if any.
IV. Third Party Fund Administration
According to the result of interview , third party fund administration is the other financial
services by AdCSI S. It is service which is rendered for the community on behalf of the
third party so as to reach the community where they are . Currently , AdCSI S is giving
the service at sub branch level . The service currently given are payment of pension
trust and salary for solid waste collectors at wereda level.
V. Mobile Banking
This is the most recent service provided by AdCSI S.C. Mobile Banking services enable
to access accounts, make fund transfers, payments and balance inquiries as well as get
instant notifications on all clients accounts .
The result of interview indicates that the service is started recently so as to reach the
services of the institution to the community easily where they are which saves the time,
energy and money of the beneficiaries . The institution is working hard to promote the
service to the community since it is new service
4.4.3.2. Non Financial Services

According to the result of the interview , the non financial service include consultancy ,
micro lease and business development training (BDT) .
I. Consultancy
The institution give consultancy services to the beneficiaries before they get loan. The
consultancy service is about the loan service, usage , benefit of saving , business plan
development , managing money, financial management and about the success of a
business .
As the interview result indicated, the beneficiaries are benefited a lot from the
consultancy services. All the beneficiaries get this services before getting any other
services .Hence the consultancy service is the key for other services provided by AdCSI
Share company
II. Micro Lease Loan
Micro lease loan disbursed for the purchase of machines according to the choices of
clients. This type of loan is rendered mostly to people who are organized in to association
( MSE operators) . The beneficiaries will pay the amount of the machine at down
payment and when completed the machine will be transferred to the beneficiaries . The
machine will be in the name of the institution until the full payment is completed .
As the result of the interview revealed, the service is creating capacity to enterprises to be
owner of different machineries which are high cost by paying the amount through long
term payment . Currently , the service is getting wider and wider so that the institution
has planned to organize it in to separate department so as to manage the demand of the
service
III. Business Development Training ( BDT)
Every member of every organization must have the necessary business skills to achieve
the company goals and implement business strategies set forth by the executives. AdCSI
Share company give trainings related to business skills, like business management,
financial management, bookkeeping , conflict resolution and developing business plan .
The out come of the interview indicated the existence of business development training
by the institution. The training has helped the beneficiaries to manage their business,
Conflict resolution ,among the group members and preparing business plan
4.4.4. The Major Challenges which affect the Performance of Addis

Credit and Saving Institution Share Company in Gulele Sub City
The fourth specific objective of the study was " identifying the major challenges which
affect the performance of Addis Credit and Saving Institution Share Company In Gulele
Sub city". Though the strengths of the Micro Financing Industry outweigh its
weaknesses, there are still big challenges facing the microfinance institutions. The major
challenges of AdCSI S.C are classified in to two broad categories . These are the
Institution side and the beneficiaries side .
A. From the Institution Side
According to the sample respondents and interview result, the challenges from the
institution side are financial challenges, management challenge and lack of
technologies.
I. Financial Challenges
The financial challenges obtained from the results of the sample respondents and
interview result include high interest rate, shorter repayment period , low interest rate for
saving and low amount of loan .
Concerning the high interest rate on loan table 4.18 indicated that the beneficiaries were
affected by high interest rate of loans given by this institution because 118 (77.6 %) of
the sample respondents described that the interest rate level on loan is high . Similarly,
118 (77.6 %) of the sample respondents have agreed that high interest on loan is one
of the financial challenges. However, Rogal (1999) indicated that provision of access to
Microcredit services, for building up self-employment, should be in the form of loans at
interest free, low interest and market rates .This indicate the institution need to revise the
policy on interest rate for loan as it affects the beneficiaries not to borrow for their
intended purpose.
Regarding short repayment period the majority of the sample respondents described loan
repayment period is not sufficient whereas the finding of the interview revealed the loan
repayment time is sufficient as it based on the type of loan . This finding shows the two
findings are not consistent .From this we understand there is no consensus between
AdCSI S.C and its beneficiaries . Thus , the institution need to discuss the issue with the
beneficiaries and take corrective measure accordingly .
Interest rates determine the amount of interest payments that savers will receive on their
deposits. An increase in interest rates will make saving more attractive and encourage
saving. Regarding the interest rate on saving, 108 ( 71.1 %) of the sample respondents
expressed that the interest rate on saving is low. On the other hand , the finding of the
interview revealed that the interest rate on saving is not as such low . The rate is
determined by the National bank of Ethiopia. It not different from other Micro finance
institutions. This indicate there is no clarity between the beneficiaries and the institution
as far as interest rate on loan is concerned. Hence AdCSI S.C should solve the problem
since it discourage the beneficiaries to save which adverse effect on the institution .
With regard to the amount of loan, the challenge is more for the MSEs operators as it
was indicated in specific objective two . But the there are also a significant number of
respondents who did not satisfy with the amount of loan provided by the institution .
From this we understand that there is difference among the beneficiaries as far as the loan
size is concerned .Hence , the institution should differentiate where the problem lies and
take corrective actions accordingly .
Lack of Cash management skill was the other challenge from financial challenge side .
With regard to this , 32.4 % of respondents have agreed the existence of lack of cash
management skills. Business management quality, educational level, and experience on
the business issues also have their own impact on performance of Micro finance
institutions. Hence , AdCSI S.C should solve the cash management skill problem so as to
save the institution and the beneficiaries risks associated with cash management .
II. Management Challenges
According to the response from sample respondents and interviewees , the managerial
challenges are lack of clear division of duties and responsibilities among employees, poor
organization and ineffective communication and lack of well trained and experienced
employees.
Managers and leaders need to develop a clear and communicated purpose that is both
compelling and that makes members feel important. Understand that employees are more
likely to be committed to the purpose of the unit or team if they are involved in creating
it. An unclear mission will result in a lack of focus and a low level of “engagement” and
commitment toward achieving it.
With this regard , the finding of the interview revealed that lack of clear division of
duties and responsibilities among the employees is one of the challenges of AdCSI S.C
particularly at the sub branches . This indicates the institution should have clear division
of duties and responsibility among the employees so as to achieve its mission .
According to Jaasma and Koper (1999), a study involving 65 saving and loan employees
and 110 manufacturing employees revealed that employees satisfaction and
organizational communication is positively correlated .In this regard, the response from
the sample respondents and the result from the interview indicated that poor organization
and ineffective communication is one of the challenges of AdSCSI S.C . This challenge is
more observed at the sub branch level . From this finding we understand that the
institution has poor organization and weak communication . lack of good interpersonal
communication skills is one of the reason for having ineffective communication . Hence ,
AdCSI S.C improve the organization and the communication to be effective .
Concerning the lack of skilled manpower , the result of the interview indicated that there
is shortage of skilled man power due to high turn over in search of better job and some un
conducive working environment . The lack of skilled man power is expressed in terms of
lack of skills like creativity ,adaptability , technical expertise , lack of the necessary
experience and poor cultural fit with the organization The problem is relatively serious at
sub branch level . Hence AdCSI S.C. need to rethink how to hire junior workers into
positions requiring more tenure and experience, and determine what additional training
will be necessary and creating conducive working environment .
III. Technological Challenge
The out come of personal observation, response from sample respondents and interview
revealed the existence of technological challenge in AdCSI S.C . The Company uses
manual working methods which leads to clerical errors , non standardized reporting and
performance monitoring system . This has negative impact on the achievement of the
institution's goals, vision and mission . Thus , AdCSI S.C need to improve the working
method used so that it minimize the risks associated clerical errors , increase its
effectiveness the provision of its services .
B. From the Beneficiaries Side
The second part of the challenges of AdCSI S.C was from the beneficiaries side which
include default and the use of loan for un intended purpose. Loan repayment delinquency
is recognized as the major threat to maintain the value of fund. A high rate of non-
repayment erodes the value of the loan portfolio and reduces income, which undermines
the hope of achieving sustainability (Levistky, 1998).
Regarding the default , the interview finding revealed that default is one of the major
challenges of AdCSI S.C . The beneficiaries, specially group borrowers are reluctant to
repay the loan within the stipulated time . Even they say to the extent that " the loan is the
government's money , so it should be given for free for us ." Despite this, the institution
is working hard to raise the awareness of the beneficiaries and bring attitudinal change as
well as carrying out a continuous follow up and controlling of the loan repayment.
Concerning the use of the loan for un intended purpose, the outcome of the interview
revealed that it is one of the major challenges of AdSCI S.C facing from the
beneficiaries side . The reasons for this challenge results from lack of awareness, lose
criteria for selecting the clients, lack of continuous follow up of the use of loan. Hence
the company need to work hard on these causes so as to solve the challenge .
4.5. Conclusion
Information was collected from 167 respondents. Based on the research objectives,
AdCSI S.C has contributed to improve the socioeconomic condition of the beneficiaries
in Gulele Sub city which expressed in terms of human capital which provided training
to 97 (63.8 %) , development of social capital.
Regarding the economic role of AdCSI S.C, the majority, 54 (35.6%) of the
respondents' average income is 4001-10,000 whereas the majority of the sample
respondents have average monthly expenditure of 501 -1000 and 2001-4000. More over ,
AdCSI S.C has positively contributed for the enhancement of the development of the
MSEs in the Sub . The services and products provided by AdCSI S.C is based on the
integrated approach i.e. financial and non financial service and products are provided to
the beneficiaries . Further more , though the strengths of the Micro Financing Industry
outweigh its weaknesses, there are still big challenges facing the microfinance
institutions. The major challenges of AdCSI S.C are classified in to two broad categories
. These are the Institution side and the beneficiaries side.
CHAPTER FIVE
5. CONCLUSION AND RECOMMENDATION
5.1 Introduction
In this chapter based on the findings of chapter four, the study objectives are concluded
and remedial solutions/strategies for identified the major challenges are recommended to
responsible bodies. Thus, in its body part it contains conclusion of study objectives and
recommendations of the study.
5.2. Conclusion
diversified, dependable and timely financial and non financial services to the poor people,
starting new business and expansion of existing business, creates employment and
empowers women or other disadvantaged population groups.
The finding of this study could be helpful in assessing the role of MFIs in achieving their
objectives . It was found that AdCSI S.C have contributed to the improvement of the
socio economic condition of its beneficiaries via human and social capita development,
improving the education and health condition , income generation and building asset of
the beneficiaries .
Like wise, AdCSI S.C positively contributed to the enhancement of the development of
MSEs through financing to start new business, expansion of the existing businesses,
creating employment opportunities for operators and for others who are un employed ,
generating income and adding fixed assets to the operators. Further, the finding revealed
that the products and services provided by AdCSI S.C is based on the integrated
approach which is both financial and non financial services . The financial services
provided by AdCSI S.C include saving , loan , insurance services , third part fund
administration and mobile banking .On the other hand , the non financial services include
consultancy , micro lease loan and business development training ( BDT).
Further more , despite its positive roles , the finding indicated that the major challenges
of AdCSI S.C are found to be from the institution side and the beneficiaries side. From
the institution side ;Financial challenges, Managerial challenges , Technological

challenges whereas from the beneficiaries side are credit default and using the credit
services for un intended purposes .
5.3. Recommendation
First of all the concerned body should take this result as input and come to agreement
with findings of the study with all major supporting organization. And these concerned
bodies should work to gather to address the following major challenges identified below.
To enhance the potential role of MFIs , suggestions for corrective actions or strategies
and complementary measures are essential. Thus the recommendation forwarded for the
following bodies.
5.3.1. For government body

 The government ( Addis Ababa city Administration) should further strengthen
and encourage MFIs in order to improve the socio economic condition of the
beneficiaries and enhance the development of MSEs . Hence , reduce the
prevailing unemployment and alleviate poverty in the city administration.
 With regard to the products and services rendered by AdCSI S.C , though the
products and services are diversified , it could be further diversified by
conducting need assessment of the beneficiaries and taking experiences of other
countries similar to Ethiopian economic level .
The major challenges identified by the research should be solved for the effective
achievement of the objectives of the MFIs in general and AdCSI S.C in particular . The
following could be suggested for solving the major challenges of AdCSI S.C .
 AdCSI should revise its strategy related to the loan repayment period, its high
interest rate on loan, small amount of loan, its low interest rate on saving, etc, so
as to encourage the beneficiaries in financial services. More over , the National
Bank of Ethiopia though supporting MFIs it needs to smooth out the regulations
and supervisions. For instance, the regulations requiring the microfinance
institutions to operate in a tightened manner particularly their capital
requirements. On the other hand, upgrading of the microfinance institutions’ scale

of operation such as graduating to the level of banking institution should be
backed by a strong regulatory frame work from the National Bank of Ethiopia
 Enhancing human development in the area via continuous on job training and
experience sharing to fill knowledge and skill gap . In addition , creating
conducive working environment and providing incentives based on merit for the
employees to reduce the turn over of experienced employees .There fore by
assessing the gap of MFIs managers and employees then filling their gap has a
significant impact to the role of MFIs . Thus, the concerned body should
continue to give continuous on job training and experience sharing to MFIs
managers and employees . Moreover, creating conducive working environment
and providing incentives based on merit for the employees .
 Availing technology for the institution by taking experience from other financial
sectors like banks and insurances and from other experienced MFIs from the
country as well as other countries .
 Continuous follow up and conducting research to identify the potential problems
of the beneficiaries to alleviate the credit default .The beneficiaries should be
guided to invest their loan for the intended purposes and productive income
generating activities via creating awareness and continuous follow up of the
beneficiaries.
5.2.2 For the Beneficiaries

The beneficiaries should attend the training and awareness creation by the institution so
as to use the loan for appropriate purpose. They should also pay the loan within the
stipulated time , especially those who are organized by group should build trust among
the group member so as to alleviate the credit default. Hence, each member of the group
need to discuss on the issue of using the loan for the intended purpose and repay on the
right time .
5.2.3. For Academicians and Researchers

This research focuses on the role of Micro finance institution in promoting the
socioeconomic condition of the beneficiaries in Gulele sub city by taking AdCSI S.C as a
case. But there are other issues like the status of financial sustainability of Micro finance
institutions, the portfolio of Micro finance institution and the status of integration of
stake holders where by researchers can conduct for further study of MFIs.
.
References
Abiola, I. And Salami, A.O. 2011 .Impact of Microfinance Bank on Standard of Living of
Hairdresser in Ogbomoso North Local Government of Oyo State , Nigeria,
International Business Management,Vol. 5, No 1, Pp: 27-32
Achamyeleh, T. E. 2011 .Microfinance. Does it support households to achieve an income
above self-sufficiency? Evidence from rural northern Ethiopia: Norwegian
University of Life Science.
AdCSI .2009.Profile of Addis Credit and Saving Institution S.C: Unpublished Material of
Organizational Report. Addis Ababa.
Adnan Ali, A. and Alam, M.A. 2010 .Role and Performance of Microcredit in Pakistan:
Master’s Thesis in International Business 15 ECTS, Department of Economics
and Informatics University West Spring term 2010
Aklilu, Y. 2002.The Importance of Micro Finance Institutions in Developing Economies:
Country Experience and Policy Implications to Ethiopia, NBE StaffWorking
Paper, ERD/SWP/005/2002.
Alemayehu, Y. 2008. The performance of microfinance institutions in Ethiopia: A case
of six microfinance institutions. MSc thesis, University of Addis – Ababa,
Ethiopia
Bartelet. A .2001.Organizational research: determining appropriate sample size in survey
research information technology, learning jornal, volume .19,No.1.
Bateman, M. and Chang,H. 2012.Microfinance and the illusion of development, from

hubris to nemesis in thirty years .world economic review.
Befikadu B. 2008 .Outreach and Financial Performance Analysis of Microfinance
Institutions in Ethiopia.
Borchgrevink, A., T. Woldehanna, G. Ageba, and W. Teshome.2005 .Marginalized
Groups, Credit and Empowerment: The case of Dedebit Credit and Saving
Institution (DECSI) of Tigray, Ethiopia , AEMFI Occasional Paper, No. 14,
September
Brhanu, T.2002. “Microfinance and Women in Ethiopia: The case of Microfinance
institutions in Addis Ababa”, in GebrehiwotAgeba (Ed). Microfinance
Development in Ethiopia: prospects, Sustainability and challenges on poverty
Reduction, proceedings of the conference on microfinance development

inEthiopia, Adama (Nazreth)
Bryman, A., 2012.Social Research Methods. 4thed. New York: Oxford University Press.
Degefe ,D. 2009.Microfinance in Ethiopia .Elixir or Poison. PhD dissertation, Institute of

Social Studies, The Hague, Netherlands. Shaker publishing.
Eriksen, Siessel H. 2008 .‘Street Venders and Shop Keepers: the Change in Saving and Credit
Activities in Addis Ababa’ in Urban Poverty in Ethiopia: the Economic and Social
Adaptations of Women. Edited by EmebetMulugeta.pp.73-111
Feigenberg, B., Field E.M., and Pande, R.2010.Building Social Capital through
Microfinance. CID Working Paper No.209 October 2010, Center for International
Development at Harvard University.
Getaneh G. 2005. Regulating Microfinance in Ethiopia: Making it more Effective.
Amhara Credit and Savings Institution (ACSI)
Guush ,B. And Gardebroek, C. 2011.Does microfinance reduce rural poverty? Evidence
based on household panel data from northern Ethiopia; Oxford university press.
Hickson, R. 2001. Financial Services for the Very Poor – Thinking Outside the Box,
Small Enterprise Development 12, no. 2 (2001)
Isserles, G.2009.The rhetoric of empowerment, the reality of "Development as usual"
feminist press organization
Itana, A.2002.Micro financing and poverty alleviation in Ethiopia. Micro finance
development in Ethiopia: prospects, sustainability and challenges on poverty
reduction. Proceeding of the conference on micro finance Development in
Ethiopia, Adama (Nazeret ) .Ed.GbrehiwotAgeba. Addis Ababa , Ethiopia
Jeffrey D. 2005. The End of Poverty: How we can make it Happen in our Life Time: Penguin
Group, USA
Lakew, B. 1998.Micro enterprise Credit And Poverty Alleviation In Ethiopia: The Case
The Project Office For The Creation Of Small Scale Business Opportunities
(POCSSBO) In Addis Ababa, Unpublished MSc. Thesis, Department of
Economic, Addis Ababa University.
Ledgerwood, J. 1999. Sustainable Finance with the Poor: Microfinance Handbook, an
Institutional and Financial Perspective.WorldBank: Washington.
Ledgerwood, J and White.V 2006.Transforming Microfinance Institutions: Providing

Full Financial Services to the Poor, WorldBank: Washington
Littlefield, Elizabeth, 2004, Afghanistan: Pioneering Donor Coordination for
Microfinance, (2/4/04)
Maanen, Gert, V. 2004.Micro Credit: Sound Business or Development Instrument,
Voorburg: Netherlands
Maes, J. 2006. Microfinance Services for Very Poor People: Promising Approaches from
the Field and The US Law's Mandate to Reach Very Poor People: What
Strategies are MFIs Developing, and what do they mean for the Rest of the Field?
-A Practitioner Survey. 2006 Global Summit of the Microcredit Summit
Campaign. Commissioned Papers on Microcredit, the Microcredit Summit
Campaign, Halifax, Canada
Mebratu Bayih .2008 .Impact of MFI in Urban Poverty Alleviation: Case Study in Addis Ababa,
Lideta Sub-City. A Paper Presented for the Association of Ethiopian
Mekonnen Y.2008 . MFI-Bank Financial Linkage: ACSI’s Experience and Future

Trends, East Africa Sub Regional Workshop, Bahir Dar, Ethiopia.
Mulu Gebereyesus .2007. Growth of micro enterprises: Emperical evidence from
Ethiopia Ethiopian development research institute( EDRI).
Murdach, J. (1999). The Microfinance Promise: Journal of Economic Literature, Vol. 37,
No, 4: 1596_1614.
Murdoch, J.andB. Haley 2002.Analysis of the Efforts of Microfinance on Poverty
Reduction: Nyu Wagner Working paper No. 1014.
Nandazi, Mbita Mary 2008.Impact of Microfinance- Microfinance and Agriculture: How to
Make it Better Work. Presented during the Association of Ethiopian Microfinance
institutions (AEMFI) Bi-Annual Conference and General Assembly. Assosa, Ethiopia,
March 24 - 27 2008
NBE (National Bank of Ethiopia) .2010.Ethiopian National Bank Annual Report 2008-
2010 .Economic Research Department, National Bank of Ethiopia , Addis Ababa.
Nichols, S. 2004. A Case Study Analysis of the Impacts of Microfinance upon the Lives of
the Poor in Rural China. School of Social Science and Planning RMIT University
Melbourne, Australia January 2004.
Nissank M. 2002.Donors’ Support for Micro Credit as Social Enterprise: A Critical

Reappraisal: Discussion Paper No. 2002/127, United Nations University:
WIDER.
Orbuch, E.2011.Towards An Integrated Approach to Microfinance. A Case for the
integration of financial and non-Financial services in microfinance institutions,
Stanford University
Robinson, Marguerite S. 2002 .“The Microfinance Revolution: Sustainable Finance for the
Poor”,pp.34, Washington D.C.: World Bank Office of the Publisher; (May 1, 2001)
Robinson, Marguerite S .2001.The Microfinance Revolution : Sustainable Finance for the
Poor. Lessons from Indonesia, The Emerging Industry, World Bank, Washington
and the Open Society, New York
Rogaly Ren. Fisher Thomas and Mayoid.1999. Poverty, social Exclusion and Micro
finance in British .Oxfam GB and New Economic Foundation
Sabharwal, G. 2000.From the Margin to the Main Stream, Microfinance Program and
Women’s Empowerment: the Bangladesh Experience Paper Submitted in Partial
Fulfillment of the Requirement for the Degree of MSC Economic Development
Management of the University of Wales: SWANSEA.
Taiwo, J. 2012. The impact of microfinance on welfare and poverty alleviation in
southwest Nigeria: Covenant University, Ota.
Tsion, S.2006. “Women and the Role of Microfinance; the case of AdCSI in Arada
Kifleketma” .MA thesis. Addis Ababa University.
UN-HABITAT . 2007.Situation Analysis of Informal Settlements in Addis Ababa: Ethiopia
United Nations-HABITAT. 2005. Financing Urban Shelter, London: Earth scan.
World Bank .2010. Empowerment and Poverty Reduction: A Source Book, the International Bank
for Reconstruction and Development: Washington.
World Bank.2009. Bangladesh: Microfinance and Financial Sector Diagnostic study:
Final Report, Washington DC.
Yunus, M.(1994).Grameen Bank, “Major Uses of Loan Funds”, Bangladesh (1994); and
Extracts from the keynote address delivered at 85thRotary International
Convention help in Taipei, Taiwan, on June 12, 1994
Annex -I

DEPARTMENT OF URBAN MANAGEMENT
Questionnaire to be filled up By Clients of Addis Credit and Saving Institution
Dear Respondent,
This research is an academic exercise conducted to assess “The role of Microfinance
Institution in promoting the socioeconomic condition of the beneficiaries in Gulele Sub
City : The case of Addis Credit and Saving Share Company”
I will be undertaken as a partial fulfillment of the requirement the Degree of Masters in
Urban Management at Ethiopian Civil Service University.
Dear, Respondent The main purpose of the questionnaire is to gather the first hand
information from participants and stake holders of the program. Without responding to
such questions ,it is impossible to achieve the objective of the research. Your response is
anonymous and will be
used for academic purpose only.
Part I. Personal data on the Respondents
1. Gender: Male 􀀀Female 􀀀
2. Age : A/ 18-35 Year 􀀀 B/ 36-45 Years 􀀀 C/ Over 46 Year 􀀀
3. Education: A / Illiterate 􀀀 B/ Primary (1-8) C/ High School (9-10) D/ Preparatory 􀀀
E / Diploma 􀀀 F/ BA Degree and Above 􀀀
4. Marital Status: A/ Married 􀀀 B/ Unmarried 􀀀 C/ Divorced 􀀀
5. Family Size: A / 1-4 B/ 5-10 􀀀 C/ More than 10 􀀀
Part II. Information on Human capital and Social Status of the
Respondents
1.Is there any training given to you by AdCSI S.C? A/ Yes B/ No
2. If you respond to the above question is, "Yes", how do you evaluate the significance
of the training in your life? A/Highly Significant B/ Significant C/ Less
significant D/ No change E/ No significance
3. Do you have any social grouping within the members of the institution? (Pertinent
only to the conditions of beneficiaries after they joined the institution). A/ Yes
B/ No
4. If Your response for the above question is "YES‟ what is the function of this social
grouping ? ______________
5. How do you level the function? A/ Highly significant 􀀀 B/ Significant 􀀀 C/ Less
significant 􀀀 D/ No significance 􀀀
Part III. Economic Condition of the Respondents
1. What is your average Monthly income ? Birr____
2. Your average monthly expenditure Birr________
3. Did you have any your own income source before joining this credit program?
A/ Yes 􀀀 B / No 􀀀
4. After joining the loan/credit program, has your income increased ? . A/Yes 􀀀 B/No 􀀀
If yes, by how much ? ___________
5. How do You express capacity for paying for your children’s better quality of schooling
after joining the program? A/ not changed 􀀀 B/ medium 􀀀 C/ higher 􀀀
6. How do you evaluate the extent of affording to pay the medical expenses after joining
the program whenever you or your family members get sick? A. lower B. medium 􀀀 C/
higher􀀀 .Explain why_____________________
7. How do you express the level of fulfilling the socioeconomic demand of your family
after joining the program? A/lower 􀀀 B/ medium 􀀀 C/ higher 􀀀 D/ very high
Explain why_________________________________________
8. Did you have fixed property before being engaged in Addis Credit and Saving
Institution?
A. Yes 􀀀 B. No 􀀀. If “Yes” state the asset______
9. Do you have fixed and movable asset after being engaged in Addis Credit and Saving
Institution program? A. Yes 􀀀 B. No .If “Yes”: A/ state the fixed asset B/ state the
movable asset
Part IV. Information Concerning Financial and Non-Financial products

and Services provided by AdCSI S.C to the beneficiaries
1.What are the products and services provided by AdCSI S.C ?
2. What do you feel about the amount of loan size given by Addis Credit and Saving
Institution relative to your demand?
A. very low 􀀀 B. low 􀀀 C. medium􀀀 D. good enough 􀀀 E/ more than enough
3. Did you pay interest for the loan? A. Yes 􀀀 B. No 􀀀
4. What is your opinion about the interest rate? A. High B/ medium 􀀀 C/ Low 􀀀
5. Does Addis Credit and Saving Institution give enough time to repay the loan? A. Yes
B. No .If “No", specify the reason_________
6. Do you have a saving account ? A. Yes 􀀀 B. No 􀀀 . If yes, how much is the amount of
savings in a month ? --------Birr. If “No” why?_______
Part V. Major Challenges of MFIs
1. What are the main constraints/ challenges of AdCSI S.C to provide the products and
services to the beneficiaries ?
A/ Financial challenges
 High interest rate for loan ....................................................􀀀
 Shorter repayment period..................................................... 􀀀
 .Low interest rate for saving................................................. 􀀀
 Low amount of loan............................................................. 􀀀 .
 Lack of cash management skills------------------------------------- 􀀀
If other, specify___________
B/ Managerial challenges
 Lack of clear division of duties and responsibility among employees .........􀀀
 Poor organization and ineffective communication........................................ 􀀀
 Lack of well trained and experienced employees......................................... 􀀀
C/Technological challenges
 Lack of appropriate machinery and equipment ............................................. 􀀀
Annex -II

Questionnaires for Clients of AdCSI S.C engaged in Micro and Small

Enterprises.
Dear Respondent,

I will be undertaken as a partial fulfillment of the requirement the Degree of Masters In
Urban Management At Ethiopian Civil Service University.
anonymous and will only be used for academic purpose only.
Thank you in advance for your kind cooperation.
Part I. Personal data on the Respondents

2. Age : A/ 18-35 Year 􀀀B/ 36-45 Years 􀀀C/ Over 46 Year 􀀀
3. Education: A / Illiterate 􀀀B/ Primary (1-8) C/ High School (9-10) 􀀀D/ Preparatory 􀀀
E / Diploma 􀀀F/ BA Degree and Above 􀀀
4. Marital Status: A/ Married 􀀀B/ Unmarried 􀀀C/ Divorced 􀀀
5. Family Size: A / 1-4 B/ 5-10 􀀀C/ More than 10 􀀀
Part II. Information on the role of micro finance for the development of
MSEs
1. In what types of business are you engaged in?
A. Urban agriculture 􀀀 B/ Manufacturing 􀀀 C/Wood and metal work 􀀀 D/
Construction 􀀀 E/ Trade sectors 􀀀 F/ Service sector 􀀀 .If any other ,
Specify ________________
2. What is the size of your business? A/ start up 􀀀 B/ growing 􀀀 C/ maturity 􀀀
3. What were the sources of finance for the establishment of your enterprise?
A/ Personal saving 􀀀 B/ AdCSI S.C 􀀀 C/Families 􀀀 D/ friend’s loan 􀀀 E/ others
sources 􀀀
4. Have you ever tried to get loan from Banks when you start your business and /or after
you started your business?. A/ Yes 􀀀 B/ No 􀀀 . If not , what is the reason?________
5. Is the loan size of AdCSI S.C in line with the financial requirements of your
Enterprise? A/Yes 􀀀 B/No 􀀀. If not , what is the reason?__________
6. Do you think that the rules and regulations of AdCSIS.C fit with your financial need?
A/ Yes 􀀀 B/ No 􀀀 . If not, what is the reason?__________
7. What were you doing before you started the business? A/Unemployed 􀀀 B/ Employed
elsewhere in similar business 􀀀 C/ working unpaid in family business 􀀀 .If any other,
specify______________
8.Do you have employees before joining in your business? A/Yes 􀀀B/No 􀀀
9. How many employees (even family members employed) do you have in your
business?
A/ None 􀀀 B / 1-5 C/5- 10 􀀀D/ >10 􀀀
Part III. Information on Human capital and Social Status of the
Respondents
1.Is there any training given to you by AdCSI S.C? A/ Yes B/ No
2. If you respond to the above question is, "Yes", how do you evaluate the significance
of the training in your life? A/Highly Significant B/ Significant C/ Less
significant D/ No change E/ No significance
3. Do you have any social grouping within the members of the institution? (Pertinent
only to the conditions of beneficiaries after they joined the institution). A/ Yes
B/ No
4. If Your response for the above question is "YES‟ what is the function of this social
grouping ? ______________
5. How do you level the function? A/ Highly significant 􀀀 B/ Significant 􀀀 C/ Less
significant 􀀀 D/ No significance 􀀀
Part IV. Economic Condition of the Respondents

1. What is your average Monthly income ? Birr_____
2. Your average monthly expenditure Birr________
3. Did you have any your own income source before joining this credit program?
A/ Yes 􀀀 B / No 􀀀
4. After joining the loan/credit program, has your income increased ? . A/Yes 􀀀 B/No 􀀀
If yes, by how much ? ___________
5. How do You express capacity for paying for your children’s better quality of schooling
after joining the program? A/ not changed 􀀀 B/ medium 􀀀 C/ higher 􀀀
6. How do you evaluate the extent of affording to pay the medical expenses after joining
the program whenever you or your family members get sick? A. lower B. medium 􀀀 C/
higher􀀀 .Explain why_____________________
7. How do you express the level of your ability to buy clothing for yourself and for your
children after joining the program? A/lower 􀀀 B/ medium 􀀀 C/ higher 􀀀.
Explain why_________________________________________
8. Did you have fixed property before being engaged in Addis Credit and Saving
Institution?
A. Yes 􀀀 B. No 􀀀. If “Yes” state the asset______
9. Do you have fixed and movable asset after being engaged in Addis Credit and Saving
Institution program? A. Yes 􀀀 B. No .If “Yes”: A/ state the fixed asset B/ state the
movable asset
V. Information Concerning Financial and Non-Financial products and
Services provided by AdCSI S.C to the beneficiaries
1.What are the products and services provided by AdCSI S.C ?
2. What do you feel about the amount of loan size given by Addis Credit and Saving
Institution relative to your demand?
A. very low 􀀀 B. low 􀀀 C. medium􀀀 D. good enough 􀀀 E/ more than enough
3 Did you pay interest for the loan? A. Yes 􀀀 B. No 􀀀
4. What is your opinion about the interest rate? A. High B/ medium 􀀀 C/ Low 􀀀
5. Does Addis Credit and Saving Institution give enough time to repay the loan? A. Yes
B. No .If “No", specify the reason_________
6. Do you have a saving account ? A. Yes 􀀀 B. No 􀀀 . If yes, how much is the amount of
savings in a month ? --------Birr. If “No” why?_______
VI. Major Challenges of MFIs
1. What are the main constraints/ challenges of AdCSI S.C to provide the products and
services to the beneficiaries ?
A/ Financial challenges
 High interest rate for loan ....................................................􀀀
 Shorter repayment period..................................................... 􀀀
 .Low interest rate for saving................................................. 􀀀

 Low amount of loan............................................................. 􀀀 .
 Lack of cash management skills----------------------------------- 􀀀
B/ Managerial challenges
 Lack of clear division of duties and responsibility among employees .........􀀀
 Poor organization and ineffective communication........................................ 􀀀
 Lack of well trained and experienced employees......................................... 􀀀
C/Technological challenges
 Lack of appropriate machinery and equipment ............................................. 􀀀
Annex -III

Interview guide questions for Key informants
Dear Respondent,
I will be undertaken as a partial fulfillment of the requirement the Degree of Masters in
Urban Management at Ethiopian Civil Service University.
anonymous and will be used for academic purpose only.
Thank you in advance for your kind cooperation.
Part I. Personal information on the Interviewee

2. Age : A/ 18-35 Year 􀀀B/ 36-45 Years 􀀀C/ Over 46 Year 􀀀
3. Education: A / Diploma B/ BA Degree C/ MA/MSC 􀀀 D/ PhD􀀀
Part II. Information on Microfinance
1. How do you express the role of microfinance institutions in promoting the
socioeconomic condition of the clients?
2. What is the role of microfinance institutions for the development of micro and small
enterprises?
3. What are the products and services provided by AdSCI S.C?

4. What are the challenges of microfinance not to operate effectively?
5. What do you suggest to solve the challenges of microfinance institutions?
Annex -IV
Operationaliztion of the Study
Research objective Operational Variables Data collection Methods of Source

terms instruments data of data
analysis
1 To assess the extent social role of -Beneficiaries Questionnaires Descriptive -sample

to which Addis MFIs Participation on statistics; benefici
( close and open-
Credit and Saving Trainings percentage aries,
-development of ended)
Institution Share -Social grouping
human capital -AdCSI
Company promote -Semi- structured
-Benefit gained by S.C
-development of interviews
the socioeconomic
social capital beneficiaries from officials,
conditions of the
their social grouping &
beneficiaries in expertis
-
Gulele Sub city; e
Economic -Income of the Questionnaires Descriptive

role of M FIs beneficiaries statistics;
(open-ended)
percentage,
 income -expenditure of the
 expenditure -Semi- structured mean “
beneficiaries
 education interviews
 health
 quality education
 asset
 medical
expenditure
 fixed asset
2 To examine the role  source of -finance Questionnaires -Descriptive sample

of Addis Credit and finance statistics: benefici
 job -Employment (open-ended)
Saving Institution percent, aries,
creation
S.C in enhancing  start -Semi- structured
the development of business -business starting and interviews, average -AdCSI

micro and small  business expansion S.C
growth Non- -inferential
enterprisesin Gulele officials,
participatory statistics;
Sub city &
observation multiple
expertis
regression
e
test
Research objectives Operational Variables Data collection Methods of Source of

terms instruments data analysis data
3 To identify the financial & non The potential services - Descriptive sample
kinds of services financial and products of AdCSI Questionnaires statistics; beneficiaries,
and products services S.C , (Open ended (percentage
-AdCSI S.C
provided by Addis -saving )
-Semi- officials, &
Credit and Saving -loan
structured -Narrative expertise
Institution Share -insurance fund
-third party interviews analysis
Company In fund
(explaining
Gulele Sub city to administration with words)
the target groups/ -micro lease
loan
beneficiaries
-business
development
4 To identify
the from the What are the remedial Questionnaires Descriptive sample
major challenges institution side strategies which statistics beneficiaries,
& beneficiaries ( closed and
which affect the enhance the
side Open-ended) -Narrative -AdCSI S.C
performance of performance of MFIs?
 financial analysis officials, &
Addis Credit and -Semi-
challenge expertise
Saving Institution  technological structured (explaining
challenge
Share Company  interviews, with words)
managerial
challenge
In Gulele Sub city -Non
participatory
observation
Annex -V
Field Research Plan of the thesis
No Activity Time Flow

march Apr Ma J July. Au Sep Oct No Dec Ja
1 preface appraisal of literatures and
title approval
2 Conducting activities for proposal
3 Conduct proposal
4 Submission of first draft proposal
5 Correcting draft thesis proposal
6 Submission of final proposal
7 Developing data collection
8 Data collection
9 Data organization and analysis
10 Submission of the first draft thesis
11 Correcting first draft thesis
12 Second draft submission
13 Submission of final thesis & defense
14 Consultation with advisor
Annex -VI
Budget Plan of the thesis
Description Unit Quantity Unit cost Total Remark

N.
o
cost
Stationery Costs and Secretary Fees
1 Pen No 10 6 60.00
2 Fixer No 1 20 20.00
4 Notepad No 2 20 40.00
5 Duplicating paper Rim 3 120 360.00
6 Digital camera rent No 1 800 800.00
10 First draft proposal print cost copy 2 40 80.00
11 Second draft proposal printcost copy 2 40 80.00
12 Proposal final print cost copy 2 40 80.00
13 Thesis first draft print cost copy 2 80 `60.00
14 Thesis second draft print fee copy 2 80 160.00
15 Thesis final print and binding copy 3 140 420
16 Power point for presentation Page 10 4 40.00
Sub Total 1,140.00
Personal Costs
1 data collector cost Labor 8 250.00 2,000.00
2 Transport cost 1500.00 1,500.00
Sub total 3,500.00
Contingency 464.00
Total Budget Required 5,104.00

Paper After Defence

Uploaded by

Copyright:

Available Formats

Paper After Defence

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Paper After Defence

Uploaded by

Copyright:

Available Formats

Ethiopian Civil Service University Institute of Urban Development Studies

INSTITUTE OF URBAN DEVELOPMENT STUDIES

DEPARTMENT OF URBAN MANAGEMENT MASTERS

ASSESSING THE ROLE OF MICROFINANCE INSTITUTIONS IN PROMOTING

Addis Ababa, Ethiopia

ETHIOPIAN CIVIL SERVICE UNIVERSITY

Institute of Urban Development Studies

ASSESSING THE ROLE OF MICROFINANCE INSTITUTIONS IN PROMOTING THE SOCIOECONOMIC

BELETE EJEGU (PhD Candidate)

A Thesis Submitted to the Urban Management, Masters Program,

Addis Ababa, Ethiopia

I Mulugeta Taye, I.D. Number UMM-0139-06, do hereby declare that this is my

Name of participant__________________ Signature___________ Date__________

Name of Advisor___________________ Signature_____________ Date________

Name of Supervisor___________________ Signature__________________

Name of Internal Examiner____________________ Signature__________________

Nameof External Examiner_____________________ Signature_________________

Name of Head of Department _______________ Signature__________________

My gratitude goes to the Ethiopian Civil Service University Department of Urban

1.2. Statement of the Problem..........................................................................................2

1. 3. Objective of the Study..............................................................................................3

1.3 .1.Genaral Objectives........................................................................................................3

1.5. Conceptual Definition...............................................................................................4

1.6. Significance of the Study..........................................................................................5

1.7. Scope of the Study.....................................................................................................6

1.8 Description of the Study Area....................................................................................6

1.8. 1 Location and Administration.........................................................................................6

1.10 . Organization of the Paper.......................................................................................8

2.1. Conceptual and Theoretical Review.......................................................................10

2.1. 1. The Concept of Microfinance....................................................................................10

2.2.1. Microfinance and its Aim on the Livelihood of the Beneficiary.................................16

2.2.2.1 .Microfinance and its Role to the Development of Human Capital..........................16

2.2.5.1 Loan/Credit Service..................................................................................................23

2.2.7.3. An Over view of Addis Credit and Saving Institution in Ethiopia...........................26

3.1. Research Design......................................................................................................32

3.2. Research Approach.................................................................................................32

3.3. Method of Data Collection......................................................................................33

3.4.1 The Target Population..................................................................................................34

3.5.1 Non-Probability Sampling..........................................................................................35

3.7. Sources of Data.......................................................................................................37

3.7.1 Primary Data Sources..................................................................................................37

3.9. Data Analysis and Interpretation.............................................................................37

3.10. Data Presentation...................................................................................................38

3.11. Methods of Ensuring Data Quality (Validity, Reliability and

3.12 Ethical Considerations............................................................................................38

3.13. Operationalization Framework of the Thesis......................................................39

4.2. Demographic Characteristics of Respondents.........................................................41

4.2.1.Gender of the Respondents........................................................................................41

4.3.2.1.2. The size of the business.........................................................................................59

5.3.1. For government body..................................................................................................97

Table 4.1: Respondents by Sex and Age...........................................................................41

Table 4.3: Educational Level of Respondents .................................................................44

Table 4.5. Social association status....................................................................................48

Table 4.6. Response Regarding Benefit Gained from Social Grouping............................49

Table 4. 7. Mean of the Average Monthly Income and Expenditure................................52

Table 4.11. The size of Business the Beneficiaries Engaged............................................60

Table 4.15. The Status of Beneficiaries' Saving ...............................................................65

Table 4.16 Micro and Small Businesses Loan ..................................................................66

Table 4.18. Response on existence of financial challenges ...........................................72

Table 4.19. Response on the level of interest rate on saving............................................73

Name of participant____________ Signature_ Date______

Name of Advisor_____________ Signature_ Date__

Name of Supervisor_ Signature

Name of Internal Examiner__ Signature

Nameof External Examiner_____ Signature_

Name of Head of Department _ Signature____