Causality between micro-finance and poverty in Ethiopia: An empirical investigation

Lack of finance is one of the major bottlenecks for economic development; as access to formal institutional credit is very limited. Thus, the government of Ethiopia brought micro finance institution into formal sector by issuing proclamation No. 40/1996 that empowered the National Bank of Ethiopia to issue licenses to supervise and regulate micro financing business in the country. Omo Micro Finance has been operational and has managed to reach more needy poor people who otherwise have no access to financial resources from banks. The evaluative research of empirical investigation were using for this study, involving both quantitative as well as qualitative studies which aims in tracing the likely effects of microfinancein poverty reduction by comparing the level of income, health and educational expenditures of beneficiaries. The two stage stratified sampling procedure were used to come up with representative sample towards a target population. Thus, this study found that micro finance credit services particularly OmoMicrofinance Institutions (MFI) has a positive impact poverty reduction, in increasing income level and improving access to health care and educational services of the beneficiaries. In other words, the micro finance credit service plays a significant role in poverty reduction endeavor in the study area, Sidama zone-Dale wereda.