The role of micro finance in accessing loan and improving the livelihood of beneficiaries: Case study of OCSSCO Jimma Zone

Abstract

The majority of the world’s poor live in rural areas. Yet most lack access to the range of financial services they need. Despite numerous government as well as non-governmental efforts to reduce the poverty of rural marginalized people through microfinance over the last decade, poverty remains deeper and yet much remains to be done to improve the quality of life of poor people. Perhaps no other development strategy has attracted so much global attention in the history of poverty focused development than micro-finance. This thesis examines the role of OCSSCO microfinance institution in accessing credit and poverty reduction. The study focuses on assessing the accessibility of credit, credit methodologies and procedures, and contributions towards reducing poverty. The study adopts mixed research approach in order to answer research questions of the study. Primary data were collected through structured questionnaire to clients and staff members, semi-structured interview with the branch manager of the institution in Jimma Zone. Secondary data were gathered from different published and unpublished relevant materials. The findings indicated that the OCSSCO micro finance institution is in fact reaching the excluded poor segments in rural area with financial products. The scheme has improved the clients’ income, asset holdings, access to various social services. However, since the institution strictly requires group formation by self selected potential borrowers as a precondition to access loans, the situation excludes the target productive poor from accessing credit. Finally, based on the findings to recommend OCSSCO to enhance accessibility to rural poor communities, to adopt different mechanism to retain existing clients, to determine loan size based on the project and cash flow and increase advisory services.