Small Loans-Big Gains: Benefits and Repayment Performance of Microfinance Programs in Tgray, Mekelle

Microfinance is the provision of small amount of loans to those who have low income and could not have the access to credit from the formal banks. The study was conducted aiming to assess impact of programs in terms of poverty reduction, women`s empowerment, timely repayment and the livelihood of borrowers of Dedebit Credit and Saving Institution(DECSI), using primary data which has been collected through structured questionnaire in the study area. Data used for this study were collected as part of the MU-IUC collaboration program between Mekelle University and Flemish Universities. A sample of 183 borrowers was selected randomly for the study. From the total sample respondents 71.58% are female and the rest 28.42% are male. Moreover, 108 are female headed households and the remaining 51 are male headed households. Therefore, from the sample clients female headed households are larger than male headed clients. Only clients who took at least two group loans are included in the study as members of the treated group. The control group, on the other hand, was made up of DECSI’s clients who took only one loan. It was found out in the study that, on average, female headed borrowers took significantly lesser amount of loan than their male counterparts. Members of the treated group in the sample enjoyed loan frequency ranging from 2-14 and it was found that the amount of loan they borrow (loan size) increased from time to time. With regard to average profit the amount of profit on average obtained by male household headed borrowers is higher than their female household headed counterparts in x all the three loan periods (Current Loan period, Previous Loan period, and Before Previous Loan period). To measure the impact of microfinance on the living condition of clients we use the Propensity Score Matching (PSM). Quasi-experimental samples which contain participants and non-participants have been used. We use household consumption expenditure as impact indicator. The analytical findings indicate that microfinance loans of DECSI have improved the clients` wellbeing in their living standard. There is a significance difference between treated and control groups in terms of food and non-food expenditure which includes expenditure on personal care, durables and jewelry. The income of the clients has increases due to the fact that beyond their food consumption they possess durable goods like household furniture and jewelry such as gold and silver. However, we did not find significant difference between program participants and non-participants for total expenditure on education, utilities and other expenses like social contributions except that in only one method is significant. The increment of income is not only at household level but also total per capita of individual household members.