The Impact of Microfinance on Household Saving: The Case of Amhara Credit and Saving Institution Feres Bet Sub-Branch, Degadamot Woreda

Abstract

In Ethiopia, among other things, low level of domestic saving  which is reflected in large resource gap is one of the fundamental problems hampering production, productivity and income of the people. Since access to institutional saving is very limited, the majority of rural poor households are forced to search financial services through informal channels and holding in-kind savings as their alternatives. To overcome these problems and to mobilize rural domestic financial resources, the government of Ethiopia supports microfinance institutions as one of the means. To this end, the government created conducive environment for the development of microfinance institutions by issuing proclamation No.40/1996 (the microfinance law). Amhara Credit and Saving Institution (ACSI) is one of the largest microfinance institutions operating in Ethiopia established in accordance with the above mentioned proclamation. Its microfinance market is the low income population of Ethiopia, particularly of the Amhara Region. ACSI’s primary mission is to improve the economic situation of low income, productive poor people in Amhara Region primarily through increased access to lending and saving services. The study sought to assess the impact of microfinance (ACSI) on household saving in Dega damot woreda.  A two stage sampling procedure was developed to select 5 sample kebels and 150 sampled rural households. Structured questionnaire was developed to collect quantitative data from sampled households’ .In addition; focus group discussion was applied to generate qualitative data. The descriptive statistics and censored Tobit regression model were used for analyzing the data collected. The output from the study shows that 70 % of sampled households practiced financial and non-financial savings where as the remaining 30 % did not practice any form of saving. Surprisingly, 73.27 % were from the treatment group while only 26.73% were from the control group which indicates the positive impact of ACSI on household savings in the study area. Therefore, financial policy aimed to encourage rural households and expanding formal financial institutions could increase the domestic resource mobilization capacity of the country and foster economic growth.

Key words: Microfinance, Household Savings, ANRS,West Gojjam,Degadamot District