THE IMPACT OF MICRO FINANCEs ON HOUSEHOLD’s SAVING; THE CASE OF AMHARA CREDIT AND SAVING INSTITUTION IN NORTH WOLLO ZONE,ETHIOPIA

Abstract

In Ethiopia, among other things, the low level of domestic saving, which is reflected in the large resource gap is one of the fundamental problems hampering production, productivityand income of the people. Since impact of institutional saving is very limited, the majority ofrural poor households are forced to search financial services through informal channels andholding in-kind savings as their alternatives. Amhara Credit and Saving Institution (ACSI) isone of the largest microfinance institutions operating in Ethiopia established in accordancewith the issuing proclamation No.40/1996 (the microfinance law). Its microfinance market is the low-income population of Ethiopia, particularly of the Amhara Region. The study soughtto examine the impact of microfinance (ACSI) on household saving in meket district. A multistage sampling procedure was developed to select 3 sample kebeles and 372 sampled ruralhouseholds. A structured and semi-structured questionnaire was developed to collecquantitative and qualitative data from sampled households’. In addition; econometric model, for instance, logit and PSM model were used for analyzing the data collected. It was observed that there was a change of amount of cash savings, year number of years of saving and inincome earned from off& none farm income-generating activities (IGA) respectively. thatparticipation in ACSI MFI household saving mobilization has a positive impact on theamount of cash saving, saving habit and income earned from off & nonfarm IGAS but in kindsaving aspects of household in terms of their livestock asset has been affected negatively inthe study area. Because low interest rate (7%) charged were gained for their deposit cashesand forced saving principles of ACSI decreased to save participants in kind and (time value ofmoney) the current market value of money hinders participants to save in kind (inflated topurchase livestock assets after accumulation of savings) their means of saving embedded withamounts of cash other than saving in kind were affected the participant households in assetcreation and stabilization.