The main purpose of this study is not only to prove the impact of loan
interest rates on the poor in the case of Tigray, Northern Ethiopia but
also to recommend improvements to address the negative effects of
interest rates that could benefit both the borrowers and the lenders.
Combinations of quantitative and qualitative analytical tools were used;
the data were collected through administration of a questionnaire to a
sample of 471 respondents from three regulated MCIs, one
cooperative enterprise, and one unregulated NGO. Results were
analysed by using SPSS software. A multi-dimensional approach with
respect to demand for credit, return on loan, loan repayment, savings,
indebtedness, multiple loans, graduation process, and wellbeing was
used and results were triangulated to obtain a full picture.
The study has concluded that the interest rate in general, primarily
charged by DECSI, eroded the envisaged profits that poor borrowers
expected to gain. This caused diversified negative impacts on the poor,
those who were entrusted to MCIs. It thus brings into question the
efficacy of the social responsibility of MCIs. From a simple analysis, it
is found that there is a trade-off between servicing the poor with a low
loan cost and securing MCIs operational self-sufficiency. Furthermore,
the poor are not only sensitive to the loan interest rate but also to the
saving interest rate. Therefore, not only access but also the cost of
credit and savings matters to the poor. Moreover, the study identified a
positive relationship between the financial capacity of MCIs and lending
interest rates. Institutions with higher profitability tend to offer lower
interest rates on micro loans but not when commercialization is an
issue. The study grasped that socially oriented and responsible MCIs
can reach the poorest without compromising financial performances, a
“win-win proposition”.
Finally, the study offers comprehensive recommendations on policy
and practice that address potential changes to how MCIs redesign their
loan and savings interest rate. The recommendations also address
how MCIs develop graduation processes and self-revolving credit
scheme frameworks that strengthen pro-poor microcredit modality.
Additionally, the study provides a way forward in the design of future
microcredit that could help MCIs deliver on their core social mandate. / Development Studies / D. Litt. et Phil (Development Studies)
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/22323 |
| Date | 28 April 2017 |
| Creators | Hagos Gemechu Haile |
| Contributors | Madziakapita, Sevenia Victor Peter |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | 1 online resource (xiii, 281 leaves) :illustrations, color map |
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