ANALYZING THE ROLE AND FUNCTION OF AMHARA CREDIT

AND SAVING INSTITUTION: THE CASE OF BEREHET WOREDA,

N/SHOA ZONE, AMHARA REGION OF ETHIOPIA

BY

HABTAMU TEGEGN
ID NO. AGR/823/10

ADVISOR Mr. GIZACHEW W. (MSc)

AN INTERNSHIP PRACTICAL ATTACHMENT AND ITS

SEMINAR REPORT SUBMITTED TO DEPARTMENT OF AGRI
BUSINESS AND VALUE CHAIN MANAGEMENT

DEBRE MARKOS UNIVERSITY BURIE CAMPUS, COLLEGE OF

AGRICULTURE

OCTOBER 2019
BURIE, ETHIOPIA
 ACKNOWLEDGEMENT

Above all, I would like to thank God for all things, who to keep myself on track. Next to this, I
would like to thank my family who’s supporting me by different things like money, giving
advice on my work (practical attachment). In addition to this, I would like to thank for different
workers employees in that organization like the manager of organization Ato Goref Nigusea.
Over more I would like to thank DMU University to give opportunity to do this practical
attachment to perform and improve my knowledge. Finally, I would like to thank my adviser for
his advice and help.

i
 ABBREVIATION

ACSI Amhara Credit and Saving Institution

ADLI Agricultural Development Lead to Industrialization
CSA Central Statistical Agency
MFIs Micro Finance Institutions
MSCs Micro and Small Enterprises
ORDA Organization Rehabilitation and Development in Amhara
PRSP Poverty Reduction Strategy Paper
SAP Structural Adjustment Program
SWOT Strength, Weakness, Opportunity and Threat
VCD Value Chain Development

ii
 TABLE OF CONTENTS

Contents Pages
ACKNOWLEDGEMENT................................................................................................................i
ABBREVIATION...........................................................................................................................ii
TABLE OF CONTENTS...............................................................................................................iii
LIST OF FIGURES.........................................................................................................................v
ABSTRACT...................................................................................................................................vi
1. INTRODUCTION..................................................................................................................1
1.1. Background.......................................................................................................................1
1.2. Mission and Vision of the institution................................................................................2
1.2.1. Mission of the Institution...........................................................................................2
1.2.2. Vision of Institution........................................................................................................2
1.3. Objective of Study This Practical Attachment......................................................................2
1.3.1. General objective............................................................................................................2
1.3.2. Specific Objective..........................................................................................................2
2. LITERATURE REVIEW.........................................................................................................3
3. MATERIAL AND METHOD....................................................................................................4
3.1. Description of Report Area...................................................................................................4
4.1 Type, Source and Method of Data Collection...................................................................5
4.2 Methods of Data Analysis.................................................................................................5
5. RESULTS AND DISCUSSION..............................................................................................6
4.1. Structure of the ACSI-Micro Finance Institution.................................................................6
Figure 1:...........................................................................................................................................6
4.2. Function of the Department..................................................................................................6
4.2.1. Manager of Metiteh Bila branch ACSI micro Finance Institution.................................6
4.2.2. The sub section of operation Department.......................................................................7
4.2.3. Financial Department.....................................................................................................7
4.2.4. Human Resource Department........................................................................................8
4.3. PRODUCTS..........................................................................................................................8
4.4. The Role of ACSI.................................................................................................................9
4.4.1. Rural/Agricultural focus:..............................................................................................10
4.5. Role of Credit and Saving Institution and Value Chain Development Program................10

iii
 4.6. The Linkage That Exist Between Metiteh Bila Branch Saving And Credit Institution
And Other Organization.............................................................................................................11
4.7. Value chain activities..........................................................................................................12
4.8. Value chain of actors..............................................................................................................12
4.9. SWOT Analysis of the Institution.......................................................................................13
5. CONCLUSSION AND RECOMANDATION.......................................................................15
5.1. Conclusion..........................................................................................................................15
5.2. Recommendation................................................................................................................15

iv
 LIST OF FIGURES
Figure Page

1: Structure of the Amhara saving and credit institution in Berehet Woreda.................................6

2 value chain activities of Metiteh Bila branch ACSI microfinance.............................................12
3; value chain actors......................................................................................................................12

v
 ABSTRACT
The practical attachment analyzing the roles of Meth Bila branch Credit and Saving Institution,
with its functions in N/shoa zone Berehet Woreda. Saving and credit institution plays an
important role in economic and social development of society by improving saving habits,
providing finance and empowering women. The primary data were collected from manager and
employees of institution through personal interview and discussion, and secondary data were
collected from manual report of the institution and internet sources. Micro finance institution
considered as a promise sources for micro and small business operator's specially women
throughout the area. Metiteh Bila credit and saving institution currently delivers four types of
financial products; saving, credit, money transfer and pension fund management. Metiteh Bila
branch credit and saving institution is a source of finances for entrepreneurs, Micro business
and small-scale enterprises that lacking access to bank and related services. Metiteh Bila
branch credit and saving institutions created different type of opportunity to society by
providing finance for who has ability to work however, restricted by lacking of money to run a
business. Metiteh Bila branch Amhara credit and saving instruction creates an access to save
money including credit service to cattle fatteners, farmers, women’s, job creator and small-scale
enterprises. Metiteh Bila branch Amhara credit and saving institution organized as manager,
operational departments, financial  department and human resource department.

vi
 1. INTRODUCTION

1.1. Background

The prevalence of poverty has been a common phenomenon in Ethiopia. The prevailing
operation of the conventional financial institution in Ethiopia is efficient providing financial
service to the poor people who live in the rural area. The challenge racing today is to reduce
poverty and achieve sustained economic growth for development in rural population. Metiteh
Bila branch credit and saving institution covers the provision of arranges of financial services to
low income households including loans, savings, money transfer and insurance.

The Ethiopia government has taken policy measure such as:- structural adjustment program
(SAP, poverty reduction strategy paper(PRSP), and agricultural development lead to
industrialization (ADLI), currently, increasing the poor access to ACSI micro finance service is
accepted of one of the tool to attack poverty. ACSI micro finance is one of the largest
microfinance institutions in Ethiopia. The ACSI micro finance was established in1988.
According to Ethiopia commercial code and it was initially initiated by the organization for the
rehabilitation and development in Amhara (ORDA), an indigenous NGOs engaged in
development activities in Amhara region. ACSI had under taken its pilot activities in 1989 and
was licensed as a micro finance share company in April 1990.

ACSI micro finance is devoted to alleviate poverty and encouraging entrepreneurship through
microcredit and saving. It provides small, low cost loans to poor people and encourages them to
develop saving and credit habits in the rural population. It is dedicated to improve /reduce
poverty and encouraging entrepreneurship through saving and credit serving the popular by
giving money with less interest rate. It provides small, low cost loans to poor people and
encourages them to develop saving habits and change the life style of the farmers.

To provide need based micro financial service to straighten the economic base of the low-income
rural people in study area through increased access to sustainable and cost-efficient financial
services.
The institution provides small loans to low income individuals and unemployed citizens mostly
for income generating activities. ACSI microfinance and small enterprises use the loans to run
their small businesses that focus on production of construction materials, wood and metal
1
products, animals fattening, poultry, and other business activities. In addition to lending money,
it offers training and industries the challenges of rural saving and credit services management to
their clients. The institution has been providing service to its clients and these services have
been bearing fruits to alleviate poverty through improving the source of revenue of the low-
income people.

1.2. Mission and Vision of the institution

1.2.1. Mission of the Institution

Given the level of poverty in the region, ACSI’s primary mission is to improve the economic
situation of low income, productive poor people in the Amhara region primarily through
increased access to lending and saving service. It will maintain cost effectiveness in services
delivery, and integrates its activities with government and NGOs working towards achieving
food security and poverty alleviation in the region.

1.2.2. Vision of Institution

ACSI aspires to see a society in which people are free from the grips of object of poverty, with
all the power determining their future in their own hands.

1.3. Objective of Study This Practical Attachment

1.3.1. General objective

The general objective of this practical attachment is to analyze the role and function of Metiteh
Bila branch saving and credit institution.

1.3.2. Specific Objective

1. To assess organizational structure of the institution,
2. To assess the value chain and agribusiness activity and the linkage of the institution with
others institution.
3. To conduct the SWOT analysis of the institution,
4. To gain experience and develop practical knowledge.

2
 2. LITERATURE REVIEW

This report focuses on the roles and functions of saving and credit institution in Metiteh bila
branch saving and credit institution. Micro finance is defined as a development tool that grants or
provides financial services and products such as small loans, saving, micro-insurance and money
transfer to assist the very or exceptionally poor in expanding or establishing their businesses. It is
mostly used in developing economies where small and medium enterprises do not have access to
other source of financial assistances (Robinson, 1998).

There are different providers of micro-finance services and some of them are; nongovernmental
organization (NGOs), saving, loans cooperatives, credit union, governments bank, commercial
banks or non-bank financial institution. the target group of micro – finance are self-employed
low income entrepreneurs who are ; traders , seamstresses, street vendors ,small farmers ,
hairdressers , rickshaw drivers , artisans blacksmith etc(Ledgerwood,1999).

Micro finance is provision of fundamental financial services to the poor whom the commercial
banks do not closest to Supply of loans, saving, and other financial services to the poor. The key
issues concerning the micro finance industry and its participants are the tradeoff between
outreach and sustainability and how to excel in one without deteriorating the pace of the other
(Hamada, 2010). The major function of micro finance institution is the provision of microcredit
which is basically small amounts of loan given out to groups or individuals. Performing micro-
finance activities requires these institutes to go in to villages and rural setting with little
infrastructure, also attract customers they usually have to increase their outreach and thus incur
massive cost for expanding their setup hiring and training of workers. Micro-finance institution
cannot easily reach the state of self-sufficiency by covering their cost (Zeller and Meyer 2002).

3
 3. MATERIAL AND METHOD

3.1. Description of Report Area

The practical attachment was conducted in Berehet woreda, North shoa zonal administrative in
the Amhara regional state of Ethiopia. Berehet woreda is one of the 27 in North shoa and 105
woreda in Amhara regional state of Ethiopia. This area has sub-tropical weather
“weynadega“high land temperature type “Dega” and low land temperature type “kola”
accounting 17%, 3% and 80% of climate respectively. The woreda Berehet is located at 220 km
east of Addis Ababa the capital city of Ethiopia. The mean annual temperature and rainfall range
between 18 to 33 °c and 750 to 850 meter above sea level, the Altitude of the area ranges from
1000 to 3200meter above sea level.

The largest ethnic group reported in the area was the Amhara (80.26%) and Argoba (19.47%); all
other ethnic group made up 0.27% of the population. Amharic was spoken as the first language
by 99.75%. The majority of the inhabitant practiced Ethiopia orthodox Christianity with 79.21%
reporting that as their religion, while 20.75% were Muslim.

Based on the 2007 national census conducted by the central statistical Agency of Ethiopia(CSA),
this woreda has a total population of 34,810 of whom 17,669 are men and 17,141 women;3978
or 11.43% are inhabitant with an area of 791.44 km2.

Mixed farming is the main economic activities of the area, 80% of common agricultural crops
like teff, sorghum; beans, wheat, peas, etc are cultivated in the area. Most of the farmers also
grow teff are a source of income. Some farmer also grow vegetable such as potato, onion,
tomato, garlic etc in the area. In addition to this livestock production is an integral part of the
production system.

Banking service are available in the district such as commercial bank of Ethiopia and ACSI
micro finance credit and saving institution/organization which is providing its service largest to
the rural population and transfer money from one branch to another branch the same to bank.

4
 3.1 Type, Source and Method of Data Collection

Qualitative type of data was collected to conduct this practical attachment. Both primary and
secondary sources of data were used. Primary data were collected from sample respondents of
the employees, managers and, and responsible people whose represents the population that
participate in rural saving and credit service management via discussion, questioning or
interviewing methods of data collection. Secondary data was generated from different written
documents, reports in the office and from an internet browser

3.2 Methods of Data Analysis

A descriptive statistical analysis technique was used to analyze the data obtained from both
primary and secondary source. Descriptive statistics such as diagram were used to describe the
data generated from different sources. The analyzed data was presented in charts based on its
natural and suitability.

5
 4. RESULTS AND DISCUSSION

4.1. Structure of the ACSI-Micro Finance Institution

Branch Manager

Figure 1: Structure of the Amhara saving and credit institution in Berehet Woreda

4.2. Function of the Department.

4.2.1. Manager of Metiteh Bila branch ACSI micro Finance Institution

Manager, of Metiteh Bila branch ACSI micro finance institution is appointed by Zone
administrator. He selected by his work experience and education evidence. The function of
manager includes:
1. Manages all subordinates in the institution.
2. Staffing Employers to the work department
6
 3. Coordinating the institution with other organization to share resource and information
4. Record daily activity

4.2.2. The sub section of operation Department

Loan processing department

1. Prepaid, adjust and arrange credit to the customers
2. Preparing journals of barrowers to record their loan
3. Decide the amount of money credited with other department
4. Process the amount of money returned to the institution with interest.

Saving Mobilize Section

1. Collect money from customers (students, women, and farmers etc) to save.
2. Encourage customers to save money.
3. Provide saving account to savers of money.

Advisory Service Department

1. Handle customers activity to advise
2. Advise the customers How, when how much and what way they save money.
3. Advise them how they use the money that they were and will borrowed
4. Show the direction of business how they became profitable.

4.2.3. Financial Department

They carry out the activities that related to money

Financial transfer section

 Bring money from zone and transfer it to cashier.
 Record the amount of money that they were bring from.
 Determine the income and cost of the institution.

Credit situate section

 Choose strategic situation to deliver loan.
 Follow the standards of super visor in order to distribute credit.
 Distribute credit only to latter enterer and credit application fulfiller.

7
  Give credit for individual as well as group.

Auditor section
 Prepares plan how, when and in what way they will check the money and financial
related activities.
 Analysis credit and saving strategies to audit.
 Correct the amount of cash flows (inflows and out flows).
 Determine the profit and /or bunk reply or benefit or cost of the institution.

4.2.4. Human Resource Department

Human resource is one of the tools in the Metiteh Bila branch ACSI micro finance institution.
Without human resource, the operation of institution is lefts merely. So human resource is the
horn of the institution and plays major roles. Function of Human resource Management includes:
1. Super vice control, direct the sub ordinates.
2. Upgrade the level of employees as the quality.
3. Raise the salary of employees.
4. Manage subordinates as well as equipment’s of the institution.
5. Prepare the employees in the ledger of staffs.

4.3. PRODUCTS
The institution currently deliver four types of financial products; credit, saving, money transfer
and pension fund management.
 Credit: Two approaches have been advocated on the role of credit in poverty
reduction. While support of the income generation approach maintains that credit should
be provided mainly to the entrepreneurial poor to enable them to finance specific private
income generation activities to increases their revenue. ACSI has so far been providing
credit only for income generating activities and related purposes.
 Saving: ACSI provides saving services with the aim of instilling the culture of
modern saving. Reducing the high propensity to spend economic surplus on social and
religious activities in pursuit of more efficient utilization for income expansion and
poverty reduction activities. There are two kinds of saving: compulsory saving
(exclusively for loan clients) and voluntary saving.

8
 Voluntary saving: is in turn composed mainly of saving deposits/pass book saving and
time deposits. With a passbook saving account, clients receive a recorded book where
their deposit and withdrawals are entered. So, they can keep track of their transactions.
Pass book saving account holder can easily deposit money and earn interest income.
Time deposits are the ones that allow clients to lock in to an interest rate for a specified
period of time.
Compulsory saving: from loan clients various obligatory or compulsory saving fund to
which all members contribute regularly (in addition to their voluntary individual saving)
throughout their membership with ACSI are intended to encourage saving at personal
level and at the same time to create investment reserve fund for on lending.
 Pension fund management:
ACSI serves as a local agent of the pension and social security authority to disburse
pension in area where ACSI has sub-branches. ACSI has a clear organizational
advantage, having offices at all woreda level and even beyond.
 Money transfer:
ACSI is also involved in the business of local money transfer, particularly to the
institution. Whereas the demand for money transfer at individual level is also growing,
particularly where the conventional bank is non-existent. Involvement into such a
business demands a detail cost-benefit assessment as well as due consideration for the
technicalities involved.

4.4. The Role of ACSI

Poor people in generally lack access to financial services from formal financial institution. Poor
households pursing micro and small-scale enterprise are excluding from formal institutional
credit services. This is because of the high collateral and antiquated lending practice of the
formal institution. Micro finance institution is considered as a promising source for micro and
small business operators specially women throughout the world. Therefore, it is a vital to
evaluate the role of micro finance programs in addressing financial need of women engaged in
micro and small business sectors. The existing operation of the formal financial institution (bank)
in the area is inefficient in providing financial services to the poor. Metiteh Bila branch ACSI
micro finance is considered to meet the gap created by the conventional financial by providing

9
financial services for the productive poor specially women so that they can engage themselves in
productive activities, i.e. micro and small business activities.

4.4.1. Rural/Agricultural focus:

 Rational Poverty: Agriculture being the dominant sector in the region, providing

income and employment opportunities for over 85% of the population, one can positively
affect the lives of many by just improving agriculture. Give the poverty situation in the
region, the highest rate and depth of poverty is suffered by the population in rural areas.
Impacting upon agriculture and rural areas improves both aspects of the poverty.
 Growth: pursuant to the agricultural development lead to industrialization strategy
(ADLI), enhancing efficiency in the agriculture ensure national economic growth
through;
1. Increased food security both for the industrial and agricultural employees, providing
adequate food (at low price) etc…
2. Increase input availabilities for the industrial sectors.
3. Capital mobilization for investment in the industrial sector through mobilizing small
saving from –increased agricultural income.
4. Increased agricultural income provides wider market opportunities for industrial
products (goods).

4.5. Role of Credit and Saving Institution and Value Chain Development
Program

Arrange of activities aimed at improving food production and the income of urban and rural poor
people are being implements including strengthening of Agricultural services and access to farm
input, promotion on and off farm income generating enterprises to credit and support for measure
that build local capacity. Metiteh Bila branch credit and saving institution are business-oriented
institution. It plays a major role on household’s income in Woreda. It provides loan for business
lead purpose especially for micro and small-scale enterprise and job creators.
 Institution was mainly based on rendering service in order to get profit to become profitable
and satisfactory. It works to hard solve problems by using all saving capacity.

10
 If institution becomes profitable, they increase the salary to the staff member however, it they
get in bankruptcy they might not pay salary to the employees or bereaves the salary of staff
or evict/taken off employees from institution.
 Nevertheless, credit and saving institution in Berehet woreda plays a great role in creating
value chain b/n d/t organs. It integrates with other organization such as agricultural,
cooperatives, youth and women, urban houses and women and development agency
organization.
 In addition to this it built strong relationship with savers and creditor customer. In other side
by taking advice from institution borrower those serves create chain with input suppliers’
advisory agents and with buyers. Finally, by running these all chain and expand agricultural
related business.

4.6. The Linkage That Exist Between Metiteh Bila Branch Saving And
Credit Institution and Other Organization

I. Agricultural and land Administration bureau.

 These organizations should provide and adjust land for job creators, micro and small
enterprise.

II. Farmers’ Cooperative bureau.

 According to the order of credit and saving institution distribute fertilizer.
 They must receive coupon to distribute fertilizer from institution to identify and
differentiate customer and to know who need fertilizer were.
III. Women and development agency
 To empower women who involve in different activity.
 To motivate and to the developments of the woredas.
IV. Finance and development bureau.
 To bereave the money that borrower must repay monthly to the institution if the
borrower were employees
V. Youth and urban houses organization soon.
 To encourages homeless peoples by providing their financial input.
 To encourages the youngest one who have a potential to create better job.
11
4.7. Value chain activities

Value chain refers to all the activities and services that bring products or services from
conception to end use in a particular industry from input supply to production, processing,
wholesale, retail and finally consumption.

Input Transform Distributio Consumpti

provision Production ation n on
Providing services:
 Advisory, extension, and training services.
 Organizational development farmers group.
 Market information and market linkages etc.

Figure 2 value chain activities of Metiteh Bila branch ACSI microfinance

4.8. Value chain of actors

Input supplier

Figure 3: value chain actors

12
 4.9. SWOT Analysis of the Institution

Strength of the credit and saving Institution

Metiteh Bila branch micro finance institution functioning currently exhibit a number of strengths
in their operations.
This are listed below -
 It initiated mainly to reduce unemployment
 Provide moderate systems (m-birr)
 The service provision is centered or urban and rural people
 The institution will prioritize women to empowering and strengthening their capacity
 Provide loan not only to poor people but also to the employees/staff
 Guarantying customers by giving micro-insurance service
 Training staffs timely to work well
 Information new information immediately to staff members.
 It gives essential services to society namely saving, credit, micro insurance and advisory
services.
 It participates to improve living standards of the people.
Weakness of the Institution
Such it is strength to one institution there is a weakness. The main weakness are-;
 Lack of professional accountant,
 Lack of full services for workers (transportation service),
 Shortage of office equipment,
 Absence of uniform appear latter like banks to parting staffs from other people and
 Narrowness of the office to staff members as well as to store the documents of the
customers.

Opportunities of the Institution

There is some opportunities to the institution that will get if some fortuitous meet. These are
 The expansion of office in order to work better
 Lack of other finance institution in the area(only bank)
 Accepted by different countries

13
  Attracting customers by providing indispensable services to expands its publicity
 Increases the size population.
Threat of the Institution
There are some threats in Metiteh Bila ACSI microfinance institution:
The repayment of the loan could not return on the maturity period by unfavorable conditions
(bankruptcy of the debtor)
There were different political conflicts and violations of the rule, this condition hinder/affect the
actions and relationship of the institution with others.
If these all condition not suitable to the customer, they will not repay/return their debt.
The other threat was that, the institution provides services to the society by these supports get
from zone, region and saving of customer if may be the support steps,
The function of institution become weak even the institution approached to close.
Experience Gained from the Externship
 Politeness of the stakeholders and stoke holder
 Develop acuity work relationship with customers
 Efficient utilization of time, these things facilitate the action of the institution
Challenges faced during the experience sharing
 Unreliable by my family; means my family were asked other neighbors university student
on the payment of practical attachment
 Deficiency of infrastructure (electric power, water) these things limits my work.
 Current political instability (the boundary conflict between Afar and Amhara people
around my place)

Possible solution taken to overcome the challenges

 Respect my family heartbeat and provides reliable evidences on the payment of
practical attachment.
 Use other power system (solar) during inefficiency of electric power.
 Provides reliable evidence of my background to the organization to reduce the
doubtfulness of the manager, it relates to current political instability.

14
 5. CONCLUSSION AND RECOMANDATION

5.1. Conclusion
ACSI has become an important contributor to the region’s economy. The sector contributor to
the regional objective by creating employments opportunities, training entrepreneurs and
generate income for low income household, micro and small-scale enterprise and others.

Metiteh bila branch micro finance credit and saving institution have well activity to society. So,
institution saves the society from lenders that bear high interest rate and by giving loan to the
society in low interest rate. Similarly, society develops to the culture of saving in woreda. The
region and its development partners have spent considerable amount of resource in crafting
policies and programs to build the growth of job Creator’s micro and small-scale enterprises and
others activity in the woreda.

5.2. Recommendation
The report recommends that firstly the institution strength that it facilitates the problem of
society. The employees of institution should take /receive training in new skills to improve their
expertise in the business operation.

The institution make efforts to full fill the requirements of urban and rural poor people’s as
well as support agricultural led development programs .but the weakness of the institution is
lack of skill professionals ,absence of uniform for employees , narrowness of office and shortage
office equipment are major comments that I give to them, so the administration of institution
should recruit additional professionals personal ,build wider office, buy employees uniform for
better attracting of customers and fulfill the lacking equipment’s in the institution.

15
 REFERENCE

The Manual report of Amhara Saving and credit Institution and the manager of the institution.
Zeller and Meyer, 2002. The impact of the debit, credit and saving institution on poverty
reduction and community development paper presented in international conference on micro
finance development.
Berehet Wikipedia (http;//enu.m. Wikipedia. Org /wiki /Berher
GAZ. Term "Berehet woreda "(GAZ: 00123504)
Ledgerwood, 1999 and Robinson, Marguerite S 1998: The concepts of micro-finance

16