Microfinance Horizon

Author(s): Solomon Bogale, Gezu Bekele & John Burns

Abstract:

This report presents the findings of the first stage of an assessment of the PSNP Plus project in Sire and Dodota woredas. These assessments are part of a broader longitudinal impact study of the PSNP Plus project, which aims to link poor rural households to microfinance and markets, as a strategy to assist people in accumulating assets, and graduating from the Government of Ethiopia’s Productive Safety Net Program (PSNP). The PSNP provides poor food insecure households with either food or cash in exchange for work, or direct support to people who are physically unable to work. PSNP participants are expected to graduate from the program within five years, and certain types of financial and productive assets are used as benchmarks for graduation.

The PSNP Plus project started in the last quarter of 2008 and aims to link PSNP participants to both formal microfinance, and in the interim, or in the absence of this, to informal microfinance by establishing Village Savings and Lending Associations (VSLA’s) alternatively called Savings and Internal Lending Communities (SILC). The project also aims to link PSNP households to markets, through the development of different types of commodity value chains. In Sire and Dodota the PSNP Plus project activities started in early 2009, and the project is supporting four value chains, cereals, white pea beans, honey and livestock fattening. This study specifically focused on the cereal and livestock value chains, and to a lesser extent on the SILC activities. The assessment also included a control (or comparison) group of non-project participants registered in the PSNP program.

The assessment described in this report had two key objectives:

1. To collect a retrospective baseline on specific types of household assets for both the intervention (treatment) samples and the control group sample.

2. To carry out a mid-term assessment of the project, this included measuring changes against the assessed baseline for both the treatment and control samples.

Although these objectives were more or less met, a drought occurred in the study area during the first year of the project and this event has largely determined the results of the assessment, and defined how these should be interpreted.

The drought resulted in household food and income shortages in the project area, characterized by the distress sale of livestock, and the employment of other economic coping strategies. As such, the assessment findings show a significant decrease in household livestock assets amongst project and non-project participants alike. This can largely be attributed to the combination of livestock sales and an increase in livestock mortality associated with the drought. The results indicate that project and non-project participants alike relied heavily in the PSNP program in order to cope with the effects of the drought.

Aside from the drought, the project has faced a number of challenges resulting in extensive delays in implementation. For example, at the time of the assessment, activities implemented under the honey and livestock value chains had been limited to planning and training, and no actual asset transfers had taken place. Given the combination of the drought and delays in implementation, little impact on household assets was expected at the time of the assessment and the results confirmed this expectation. As such, and given these considerations, the results presented in this report should be viewed strictly as baseline data against which future changes or project impact might be assessed.

To download the full report Click Here