The impact of microfinance in the development of micro and small enterprise owned by women in Addis Ababa, Ethiopia

Abstract

Poor people benefit from microfinance and positively improve their poverty and socio-economic conditions. Microfinance support serves as development tool to redress the exclusion of the poor from the development process and outcomes in the mainstream intervention frameworks. As developing countries and poverty context are diverse and contextual, comprehensive knowledge about and empirical evidence on the impact of microfinance is scant. Specifically, the impact of microfinance services on the development of micro and small enterprises (MSEs) owned by women is scant. The findings of available studies and policy practice reports on microfinance in Ethiopia are not holistic in terms of a theoretical lens and methodological pluralism. Available studies do not consider the impact of microfinance and non-financial services on women-owned MSEs at household, individual and enterprise levels thereby reducing the poverty context and holistic empowerment at these levels. This study used multiple theoretical and conceptual frameworks: Hulme’s (2000, p. 79 - 81) microfinance impact assessment tool, debates on survivalist and growth-orientation perspectives of MSEs (Harvie, 2003, p. 27; Snodgrass & Biggs, 1996, p. 43; Hallberg, 2001, p. 19; Nichter & Goldmark, 2005, p. 67), women empowerment continuum model of interpretation (Filmon, 2009, p. 87) and policy practice at the epicenter of governance and policy decision-making (Addis Ababa, Ethiopia’s capital). The assessment considered three elements of microfinance impact assessment, generating primary evidence from 120 micro and small business owners (women entrepreneurs) whose firms stayed two years and above in the market and as clients of selected microfinance institutions. The clients considered were those who accessed at least two loan cycles and above. The respondents were randomly selected from three randomly selected microfinance institutions and a survey questionnaire was administered. The data sets were analysed using multiple tests (non-parametric statistical tests such as Pearson Correlation, Paired-Sample, Chi-Square, Wilcoxon Rank and McNemar tests) as well as parametric tests were conducted using logit econometric model. These tests were conducted to determine statistical difference of microfinance services after program intervention and the contribution of total loans taken on expenditure and businesses investment. The results indicated both developmental or survivalist firms. The result also indicated the empowerment of the women (MSEs owners). A significant number of women entrepreneurs owning MSEs improved their living house, cash savings, household income, child education, household health, household food and diet, business investment, and decision making status in their households. In terms of policy support, the study identified that there were specific affirmative interventions (as stipulated in the policy documents) to support women entrepreneurs owning MSEs in terms of targeted financial service, provision of working and selling premises, designing and implementing training and skill development programs, market networking and tax support on their products and sales. The study recommends that different institutions that work on women empowerment and women associations have to design women focused affirmative policy and strategy interventions to scale-up the positive results (growth-orientation of the MSEs) and address the bottlenecks that limit women entrepreneurs who own MSEs from accessing services that can transform the survivalist MSEs to profitable and empowering businesses for women. The recommendations are proposed to link women empowerment with working policy support.