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In a country where almost half of the population barely survives on less than a dollar a day, microcredit offers poor people a unique opportunity to engage in small businesses or improve their agricultural production. With the support of IFAD, microfinance institutions such as the Amhara Credit and Saving Institution (ACSI) extend small loans to poor people in rural areas to help them improve their incomes and overcome poverty.

In the mountainous, sparsely populated Amhara region, rural people struggle to make a living. Displaced by famine or by the lack of economic opportunities, most of them have relocated into areas as poor as the ones they left, where they have no assets and no land to cultivate. The Amhara Credit and Saving Institution (ACSI), a microfinance institution, was established in 1995 to help the most destitute but active members of rural communities invest in a better future. With support from the International Fund for Agricultural Development (IFAD), ACSI provides much-needed financial services to poor rural people, enabling them to invest small sums of money in productive activities.

“I used to live in another region,” says Assefash Fikira, trader and owner of a hotel and nightclub. “When I came here with my husband, we had nothing. I made local beer and my parents helped us out a bit. Things started to change when I took out a loan from ACSI five years ago. “I borrowed 1,000 birr (about US$108) the first year to open a hotel. A year later I took out another loan, for 3,000 birr, and opened a nightclub. I bought a refrigerator, furniture and a sound system for

my business. Later I opened a cosmetics shop, and with the extra income, I was able to pay for my parents’ house, which had been confiscated by the commercial bank because they were in arrears in repaying their loan.”

Assefash is one of ACSI’s clients in Woreta, a rural town where the financial institution established a sub-branch. “Most of our loans go to agricultural activities,” says Lakew Mitiku, coordinator of the sub-branch’s field workers. “But we also provide loans to set up small businesses. ACSI is not like a normal bank. Our objective is to help poor people in Amhara rise up out of poverty.”

Lending to poor people was unheard of in Ethiopia when ACSI began its activities in 1996. “We started in 6 of the 140 woredas (districts) in the region,” says Mekonnen Yelewemwosen, general manager of ACSI. “I couldn’t sleep at night, worrying that people would not repay. We didn’t know whether we would succeed. After all, it was the first time that poor people had access to loans and we had no idea how they would react. When the first repayments started coming in, I was thrilled. We had proved to the whole sector that poor people were bankable. All, without exception, paid back their loans.”

ACSI operates through 10 branches, 185 sub-branches and 11 microbanks — for those who have graduated from microfinance — and one head office. It reaches 1.2 million poor people and has 650,000 active borrowers. Interest rates vary from 10 to 18 per cent for agricultural and microenterprise loans. The smaller the loan, the higher the interest rate.

Demand for credit is large and growing

Category: Payday loans

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