The Role of Microfinance Institutions in the Development of Small and Medium Size Businesses in Ethiopia, A Case Study in Amhara Credit and Saving Institutions

Abstract

Microfinance is a term used by many in different domains to fight poverty. Poverty is a syndrome that is affecting the developing countries and especially in sub Saharan Africa. The study tries to look at the impact of microfinance the role of microfinance institutions in the development of small and medium size businesses.  The primary sources of data are questionnaires and interviews. The population was drawn from the members (clients) of ACSI and the credit unions constituting Small and Medium Size Businesses (SMEs). The study made use of closed and open ended questions. The responses were analyzed using percentage frequency tables. From the information collected, it is realized that ACSI has a positive impact in the development of the members? businesses and provide its members with financial and social intermediation services to help improve their businesses. Securing micro-financing by SMEs is determined by the stage or level of development in which the business is. Businesses that are viewed as growing had it easy to get a loan. But the main criteria used were the ability to pay back and to meet the set requirements to obtain a loan. The main requirement is fixed tangible assets such as land. The study indicated that the poorest of the poor were not included in designing and implementing their policies. The entry requirements are difficult for the poorest to meet thus they do not enjoy the services of ACSI. In this study the poorest are those who are not involved in any income generating activities.

Keywords: ACSI, Ethiopia, Impact, Microfinance, SME Development.