Helping Microfinance Boom in Ethiopia

By Philip Berber

When A Glimmer of Hope started its work in rural Ethiopia eight years ago, we began by investing in the basic societal building blocks that were so lacking throughout the country and by establishing partnerships with indigenous development organizations and NGOs.

Over the next few years, we implemented hundreds of water and sanitation schemes and a large number of health care, education and veterinary facilities. The impact of these projects was immediate and profound and we could clearly see the difference they were making in the lives of some of the poorest people in the world. That’s why we continue to invest in them.

And, we are always looking for ways to innovate and extend our reach and, given this philosophy, moving into microfinance became a natural progression for us as part of a broader integrated approach to development.

If we can give the poor a hand-up instead of a hand-out and help them tap into the entrepreneur within, we can help reduce their poverty forever. It’s about trade and aid. It’s about personal empowerment through financial empowerment.

From our experience, there’s little doubt the most effective way to help the poor break the cycle of poverty is to give them the opportunity to create sustainable solutions for themselves. But to do that, they need access to credit.

One of our key members of staff – Program Director Norma Van Horn – was recently in the Amhara Region of Northern Ethiopia where she got a first-hand look at the impact even a small amount of credit can have.

Below is her account of a meeting she had with a loan recipient [pictured here with her family]:

“We just returned from Amhara (about 1.30am last night) where I met a recipient of one of our 2008 microloans. Her name was Ashagura Iyasu. She is 35-years-old, married with six children and had received a loan for 2,000 birr ($200).

Before the loan, she had a small plot of land under cultivation on which she grew tomatoes, oats in the fall crop and corn in the spring crop. Ashagura and her neighbor used to rent a pump to irrigate their plots with water drawn from nearby Lake Tana but it was not uncommon for the pump to be late and their harvests suffered.

After receiving her loan, Ashagura and her neighbor (who also received a loan) pooled their resources to buy a pump of their own for $600. I didn’t get to speak to the neighbor but the impact on Ashagura has been remarkable as she has been able to substantially increase the amount of land she has under cultivation at any given time.

Last year, her income from the fall crop of tomatoes and oats was $50-$60; this year, she received $300.

She was able to take back and plant garlic on a portion of her plot that she had previously been renting out for $30 a year; her first garlic harvest netted $400.

She went from netting $90 for the fall crop last year to $700 for the fall crop this year and her plans to add yet another crop (rice) will continue to expand her income. Adding rice to her four other crops will also ensure her land is under cultivation 12 months a year as it will grow while the land is flooded for two to four months during the wet season.

She has gone from two small harvests of three crops to three large harvests of five crops. This greatly expands her income and diversity of diet and risk.

Her family’s diet used to consist of beans and peas; now she’s added meat to their diet – a huge change.

With her earnings she has purchased an ox, sent her daughter to school (she had graduated from high school a year ago but had been unable to afford college for her until now) and bought clothes for her family.

She also now rents her pump to others generating even more income.

The fact that all of this has occurred in just eight months since she received her loan is amazing and a shining example of the credit worthiness and hard working tenacity of Ethiopia’s rural poor if they are given a chance.”

Norma Van Horn – Addis Ababa: June 26, 2009