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EUROPEAN MICROFINANCE PROGRAM

Topics in Microfinance:
Proposal to Evaluate the Impact of Micro Leasing
Interventions

By:
Melkamu Wogari
Master Specialization in Microfinance

Submitted to:
Professor W. Pariente
April, 2018

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Table of Contents
Organization Profile …………………………………………………………………………………………………… iii
1. Brief Description of the MFI and the Context ………………………………………………………………..1
2. Research Questions …………………………………………………………………………………………………..1
2.1 Rationales for the Interventions………………………………………………………………………………1
2.2 Aim of Evaluation and What to Learn ……………………………………………………………………..3
3. Evaluation Method ……………………………………………………………………………………………………3
3.1 Proposed Method and Its Justification ……………………………………………………………………..3
3.2 Limitation of the Method ………………………………………………………………………………………4
3.3 Data Type and Collection Techniques ……………………………………………………………………..4
4. Conclusion ………………………………………………………………………………………………………………5
References ………………………………………………………………………………………………………………….6

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Organization Profile

This impact evaluation proposal is prepared from the perspective of Women Enterprise
Development Program (WEDP) which is Non-Governmental Organization aiming to increase
the earning of female entrepreneurs in Ethiopia. WEDP has been empowering women
entrepreneurs in developing countries and supporting them in starting and growing their
business being working mostly with micro finance institutions. Currently, Debo microfinance
institution which is located in Ethiopia is intending to affiliate with WEDP to diversify its
services with in some target areas. Thus, this proposal is made to evaluate the impact of micro
leasing intervention on efficiency and profitability of women micro entrepreneurs. I am so
confident that the proposal will help both WEDP and Debo microfinance institution to make
informed decisions on whether to continue delivering the newly designed micro leasing product.

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1. Brief Description of the MFI and the Context

Debo Microfinance Institution is established before three years ago in Ethiopia locating its head
office in the capital city known as Addis Ababa. Debo MFI is a private microfinance institution
which aims to do business and generate profit to its shareholders through the provision of
efficient microfinance services and improve the socio-economic situation of its customers. The
institution intends to primarily provide efficient and effective microcredit, micro leasing and
saving services to its customers (Debo Business Plan, 2015). According to the business plan, the
assessment of the overall Ethiopian economy in general and the financial sector in particular has
shown that the potential for micro finance business is still untapped, despite the existence of a
number of financial institutions. Moreover, micro, small and medium enterprises are extremely
increasing from time to time and the general market is calling for innovative and sustainable
financial services. In view of that, Debo MFI is targeting micro, small and medium enterprises
and the missing middle groups to assist their business and improve the socio-economic situation
of the customers.

2. Research Questions

2.1 Rationales for the Interventions

As the government is thriving to support many enterprise developments in various ways,
development and potential growth of microenterprise in Ethiopia is promising. Private financial
sectors such as MFIs are highly targeting such potential markets and delivering different
microfinance services to support the sector and generate the expected return for their
shareholders. Similarly, Debo MFI is intending to provide „Digital Electric Mitad? as micro
leasing product for women micro entrepreneurs involved in Injera business by partnering with an
NGO known as Women Enterprise Development Program (WEDP) which has aim to increase
the earning of female entrepreneurs in Ethiopia.

„Electric Mitad? is a tool for cooking „Injera? or flat bread particularly in Ethiopia. According to
Moges (2017), Injera is stable food for Ethiopians and the weight of a single Injera ranges fro m
350 to 450 grams. In accordance with the report, the local Electric Mitad is made of iron metal
and 8-12 Kg clay plate; consumes 4 KW starting and 3.8 KW average steady powers. It is highly
criticized that the conventional Mitad is energy inefficient inevitably resulting in high energy
consumptions. Due to this, there exist high power interruptions especially during peak working
times and holly days and as a result microenterprise owners complain that such interruptions
create huge negative impact on their business performance. Moreover, some state that they are
forced to cook during night time to escape from power interruption problem as it can be slightly
slack during night. This is also another burden on women microenterprise owners doing Injera

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business. On the other hand, the local market for Injera is significantly increasing from time to
time. As Moges noted, over 2 million Injera per day is required to meet the demand and over
500,000 traditional Injera Mitad exist in the Addis Ababa City Administration. Realizing this,
Debo MFI being affiliating with Women Enterprise Development Program is aiming to make
intervention by providing digital and efficient Mitad Machine as micro leasing product for
clients so that they will be able to provide efficient services, generate higher profit and improve
their living standards. The so called digital Injera cooking machine is developed in USA by
Ethiopian born American citizen. According to Moges?s report, the digital Mitad machine is non-
clay based machine, very energy efficient, requires small work space, resilient and has improved
cooking performance. Moreover, the machine is very fast meaning that it has the capacity to
produce very high number of Injera per hour when compared with the traditional one. Thus, it
can save time, reduce cost and burden that woman entrepreneurs are facing with the local
cooking machines. Moreover, the improved production capacity of the machine could help
clients gain better efficiency in the market and boost their return. Therefore, based on these
concrete facts, Debo MFI is strategically targeting the market and opting to partner with WEDP
to provide customer based product and assist microenterprise development in the city. Moreover,
the city is the most populous and fast growing area and demand for Injera is steadily growing.
Exporting Injera to the international market such as USA, Canada, Sweden, the UAE, and Saudi
Arabia is even flourishing. Therefore, it is expected that the target customers can be the most
potential market for the MFI in the near future. Figure 1 and 2 below shows Ethiopian Injera and
manner of cultural serving modality respectively.

Figure 1: Ethiopian Injera Figure 2: Cultural Serving Modality
Source: file:///C:/Users/Inspiron/Desktop/Zigni-12.jpg

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2.2 Aim of Evaluation and What to Learn

The aim of the planned evaluation is to explore the impact of customer based micro leasing
products on production efficiency and profitability of target women micro enterprise owners. In
particular, we want to assess the impact of digital Mitad machine leasing products on the
efficiency and profitability of Injera businesses being carried out by women micro entrepreneurs.
This evaluation could also help to see whether the product fits to the needs of the client since it is
a new product designed as a pilot project and could open an avenue to make improvement based
on feedbacks from clients. Furthermore, the result of the evaluation can communicate something
useful to both MFI and NGO (WEDP) to make informed decisions whether to continue or not
with the new product. Figure 3 and 4 below shows traditional and digital Injera Mitad
respectively.

Figure 3: Traditional Injera Metad Figure 4: Digital Injera Metad

Source: file:///C:/Users/Inspiron/Desktop/710+myJppDL._SL1500_.jpg

3. Evaluation Method

3.1 Proposed Method and Its Justification

The proposed approach to conduct this evaluation is Randomized Control Trial (RCT). It is the
best method to examine impact particularly if the intervention or the policy is not yet
implemented. Fortunately, the digital Mitad micro leasing product is new and not yet
implemented in the city and as a result, employing RCT can be considered as “gold standard
design” for this particular study. Moreover, Debo MFI is proposing to partner with Women

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Entrepreneurship Development Program for Ethiopia which can be strategic source of fund to
carry out this pilot project and impact study.
3.2 Limitation of the Method

Even though randomized control trial is the best and preferable methodology, it presents some
limitations. According to West and Spring (2007), RCT is time and energy intensive, expensive
and may not be possible for all interventions since some ethical issues could be raised and even
some institutions have policies that prohibit random assignments. By the same fashion,
implementation of this method could result in high cost and increase some ethical concerns as
the control groups will be expected to be excluded from micro leasing services intervention at
least during the program year. Generalization could also be affected since the evaluation or the
study will only depend on specific target groups. Furthermore, other exogenous factors that we
cannot observe may intervene and affect the proposed study.

3.3 Data Type and Collection Techniques

Addis Ababa is the capital city of Ethiopia. It is the largest city in the country by population of
over 4 million in 2017. Addis Ababa is a chartered city and as such, is considered both a city and
a state. It is the largest city in the world located in a landlocked country. The city is divided in to
ten (10) sub-cities. Out of these sub-cities, only two sub-cities, i.e. Addis Ketema and Gullele
sub-cities will be targeted by Debo MFI. This is because of the fact that both are the largest
adjoining sub-cities where many Injera trading women micro entrepreneurs are located. Based on
some eligibility criteria, 2,000 women micro enterprise owners working on Injera business will
be carefully selected. Renewed trade license in Injera business, female micro enterprise owners
possessing one traditional Injera Mitad and residing in the two target sub cities could be the main
criteria for selection. After carefully selecting the 2,000 eligible potential clients for the
intervention, 1,000 will be randomly assigned to the microfinance service product (will get
digital Mitad micro leasing product) and the remaining 1,000 won?t get access for the service.
Clients who will get intervention (treatment group) could immediately start using the leased
digital Mitad and avoid the traditional one. The treatment group will be required to do so since
they are allowed to use only one “Mitad” by Ethiopian Power Authority as a policy for faire
distribution of electric power energy for micro enterprise owners in the city. Therefore, it is
strongly assumed that there is no chance for the treatment group to use both the leased digital
Mitad and the traditional one.

Data will be collected from both participants and non-participants. Moreover, the data need to be
aligned with the aim of the impact evaluation. Accordingly, the main types of data to be
collected are: lists of participants, average production capacity per hour (average number of

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Injera produced (baked) per hour, average amount of grain (Teff) used per month (in Kilo gram),
electricity bill paid per month and number of Injera sold per month. Moreover, an effective data
collection technique is expected to be used. Precise baseline and end line data will be collected
from both treatment and control groups. Furthermore, standardized data will be recorded by
well-trained officers from all control and treatment groups at the end of every month for the total
period of twelve months. Hence, the intervention program will only last for one year period.
Finally, all collected data will be compared and analyzed at the end of twelve months in order to
evaluate the actual impact of digital Mitad micro leasing product on Injera trading micro
entrepreneurs. Beware that data relating to the average production capacity per hour of the
Mitad, electricity bill paid per month and number of Injera sold per month are the most
indicators for performance efficiency and profitability of the micro business in this regard.
Therefore, all those data could help to see whether digital Mitad micro leasing product can lead
to improved performance efficiency and profitability of micro enterprises involved in Injera
business particularly in Addis Ababa city administration.

4. Conclusion

Nowadays, impact evaluation is challenging and debatable task in microfinance industry.
Nevertheless, addressing the impact of any given intervention is crucial; otherwise, the role of
any intervention couldn?t be perceived. I believe that this impact study will allow the partnering
NGO (WEDP) to make educated decision as to whether to continue or discontinue assisting the
MFI?s in digital Mitad micro leasing project based on the result of the impact evaluation.
Furthermore, it will also benefit the MFI by helping to learn from the pilot testing and improve
the service delivery system and adapt the product to their needs. Thus, the MFI could be able to
extend the services to other sub-cities in Addis Ababa and other parts of the country given that
the impact of the service is proved to be positive for the country in general and for the client in
particular.

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References

Debo MFI (2015), Debo Microfinance Institution, Business Plan, Ethiopia, Addis Ababa.

Digital Injera Mitad, available at:file:///C:/Users/Inspiron/Desktop/710+myJppDL._SL1500_.jpg

Ethiopian Injera, available at: file:///C:/Users/Inspiron/Desktop/Zigni-12.jpg

Moges, G. (2017), Electric Injera Mitad Energy Efficiency Standards & Labeling: Challenges
and Prospects, Ethiopian Energy Agency (EEA), Vienna Energy Forum.

West, A. and Spring, B. (2007), Randomized Controlled Trial, available at:
file:///C:/Users/Inspiron/Desktop/Pariente/RCT.html.