Credit Access in Ethiopia Growing in Rural Areas

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SEATTLE — Credit access can be defined as the availability of financial institutions in a country and the capacity of individuals to obtain or utilize these essential services. The availability of credit is a major indicator of a country’s poverty level. It is essential to alleviating deeply entrenched issues like rural poverty in particular. Ethiopia, a developing country with one of the highest poverty rates in the world, currently standing at 30 percent, is steadily working towards maximizing its credit access.

Microfinance or microcredit is an important source of credit access for many countries. They are often in the form of small loans and are used to bolster the position of businesses in developing countries. They can help increase employment and real incomes in the country.

These important forms of finance are channeled to key sectors of the economy. It aids specific individuals and communities. It is essential for the development of the private and public sectors in countries. The Grameen Bank in Bangladesh is a significant example of microfinance and successful private lending.

Women, in particular, face a heavier burden due to the lack of credit access in Ethiopia, owing in part to a patriarchal culture that is especially prevalent in rural areas. With more access to credit, social security nets for women will be enhanced. They will have more opportunities to better meet the needs of their families in the future.

Moreover, improving credit access for the agricultural sector in Ethiopia is especially crucial given the country’s reliance on it and the added threat posed by climate change and the volatility in global weather patterns. Recent years of drought have made the market less predictable and affected crop yields. Poor rural communities are especially impacted by the lack of credit access in Ethiopia.

A long-term solution to ensuring credit access in Ethiopia begins with focusing efforts on the growth of manufacturing, which is key to tapping into the country’s future economic potential. Furthermore, integrating and collaborating with private microfinance institutions in the future can also be effective in increasing credit access in Ethiopia. In the near future, coverage will increase as more individuals and vulnerable families gain access to larger and more substantial loans.

Village banks in the country are becoming more widespread in order to support rural communities and farmers in the sector. This particular initiative is being supported by agencies like Mercy Corps and Farm Africa and backed by the Building Resilience and Adaptation to Climate Extremes and Disasters (BRACED) program of the U.K. Department for International Development.

With growing credit access in Ethiopia, individuals will be better able to use financial institutions in the future. It could help build the foundation for improving other deficiencies and macroeconomic challenges in the economy as well. In the long run, improving the level of credit access in Ethiopia is beneficial for increasing the overall economic self-sufficiency of communities and building the capacities of key stakeholder groups.

– Shivani Ekkanath

Photo: Flickr

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