Bringing Sustainability to Ethiopia

Sustainability and Poverty Reduction

Sustainability is a major problem in many parts of the world. One in two people worldwide lives in poverty and the human cost of poverty is 30,000 children who die each day. Microfinance lending provides small loans to the poor to help them engage in productive activities and work their way out of poverty. As the saying goes, “Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime.” This concept describes the basic goal of sustainability that microfinance focuses on. Worldwide, the need for microfinance is great because it acts as an effective tool for reducing poverty and establishes small businesses. 

Microfinance can be an effective and powerful tool for poverty reduction. With most poverty-stricken individuals living in rural areas, food insecurity is one of the main challenges to economic development in poor countries, particularly Ethiopia. 

With an estimated population of 60 million, approximately 85% of Ethiopians live in rural areas. Because of harsh circumstances that make agricultural production tough, a large number of people cannot support their families with food. Through microfinance, ideas and programs are implemented to increase food production; therefore, the overall level of poverty is reduced. By promoting entrepreneurship and free markets, the small loans not only benefit the borrower, but also create jobs and financial stability for many others. As new businesses emerge, overall dependency is reduced

The outcomes of microfinance have shown to be positive including increased sustainability and improved education. Microfinance should be supported because it helps bring sustainability to rural areas instead of temporary relief assistance. One of the pronounced features of microfinance is that credit programs can be designed and adapted to fit specific villages and groups.

Ethiopia’s poverty-stricken economy is based on agriculture, but with droughts and poor farming practices production is hard to maintain. Hope Arising has begun to establish unique practices in villages to create sustainable food and agricultural production through gardening and sheep fattening. From there, businesses slowly grow and are maintained, creating a steady source of income for families. 

Microfinance looks to educate individuals about business before giving out loans. More and more women in poverty are being educated because they comprise the majority of borrowers and are more likely to support their children. By learning the basics of business, individuals will know how to run and keep a business going and they will be able to share that knowledge with families and acquaintances, establishing an effective market in villages. 

Along with business education, the effects of microfinance on livelihood can be multidimensional.  Some of these positive effects include that women become more empowered, health education spreads, and households function more efficiently. An overall healthier way of life is created through microfinance. Jump-starting small businesses by providing small loans to the impoverished is a concept that should be supported by those in developed countries.

SOURCES:

http://www.worldvisionmicro.org/pages/statistic 

Berhane, G., Gardebroek, C. (2011). Does

     Microfinance Reduce Rural Poverty?

     Evidence Based on Household Panel Data     

     from Northern Ethiopia. American Journal of

     Agricultural Economics, 93(1), 43-55.

Amha, W. (2000). Review of Microfinance

     Industry in Ethiopia: Regulatory Frameworks

     and Performance. Association of Ethiopian 

     Microfinance Institutions, 2, 1-48.

     

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