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Ethiopia invests in farmers to achieve country's middle-income ambitions
A local farmer's success growing apples reflects the Ethiopian government's plans to invest in farming and achieve growth
Fields of red sorghum in terraced fields that stretch into the distance are a common sight in the scenic mountains of eastern Ethiopia, giving a misleading impression of bountiful harvests despite this year's drought in the east Africa.
Farmers tie five or more tall sorghum stalks together so they support one another, and the red seeds at the top of the plant grow heavier as the plants ripen, giving them a triffid-like appearance. A common plant and an important staple crop for millions of poor Ethiopians, sorghum is ubiquitous in the region around Dire Dawa, 352km north-east of Addis Ababa, the capital.
Apple orchards are a more surprising presence. Dadi Yadete, a bearded 72-year-old, took a gamble three years ago and started growing apples, a fruit that he didn't know. Hesitant and doubtful initially, he planted 12 trees, but the experiment has paid off. Located 2,300 metres above sea level, these Ethiopian highlands enjoy a temperate climate, almost alpine, where apples can thrive.
Yadete, who has two wives and nine children, now has 70 flourishing apple trees on his small plot of land – about 0.5 hectares – where he also has a large avocado tree. He also grows barley, a few coffee bushes, sweet potato, green pepper and bright red hot chillies.
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Although China may seem to be bucking the trend, command economies are never sustainable. Lets not make a mistake, Ethiopia is a command economy where the country is run on the whims of a single individual. If there is one thing history has thought us is that an independent judiciary, strict property rights, enforcement of contracts and free flow of information are all a necessity for sustainable economic prosperity. In cases where these essential elements are lacking the economic gains attained are easily erroded as the newly rich transfer their wealth to “safe” areas where the essential elements exist.
This can easily be seen in China’s newly minted wealthy that are flocking to the west and even our own elite and politicians who can’t wait to stash their wealth abroad. Emperor Meles has to understand that reforms are a necessity. If our country is to prosper he’ll have to voluntarily clip his wings. Ethiopia’s burgeoning population, the state of the world’s economy and commodity prices means that even the astronomic growth rates trumpeted often are not sufficient to cater to the needs of the population. We can highlight “success stories” fueled by artificial capital coming from foreign “good doers” but never assume that this is sustainable. The notion that we can develop our economy while sticking to an archaic political system is just a fallacy!!!
With half a billion dollars of UK international aid given to the illegitimate Ethiopian government each year coupled with this joint venture of the United Nations World Food Programme, sadly only a minority will be the Beneficiaries of Meret under ethnic federalism. Hardworking Ethiopian, Dadi Yadete has just 0.5 hectares of farm land for his family with a $600 return on the sale of apples annually, Under the the law abiding Constitutional Monarchy, Dadi and his family would be entitled to a gasha(30-40 hectares) of freehold land to be past down from generation to generation in order to increase their standard of living. Meanwhile the alien imposed federation of secession continues to evict farmers from lands they have been tilling for generations to make way for wealthy outsiders who are leasing very large swathes of fertile lands for a dollar an acre, supposedly for 99 years, exporting the bulk of the agricultural produce, which has contributed to hyperinflation on essential food items in Ethiopia because demand has outstripped supply.
“The most effective way of utilizing any outside assistance is to create and develop an atmosphere of self-help, where the available human and natural resources could be tapped in the best interest of the people. Everyone, in all walks of life, regardless of his professional occupation should feel concerned and play an active role to solve such problems which affect mankind, Now, We call upon the generosity of Our people to help develop agriculture and improve its productivity.” Selected Speeches of His Imperial Majesty Haile Selassie I, Freedom from Hunger Campaign 1963
“The forest resources of Our Empire constitute one of the most important elements of the wealth of Our land. When Our forests are properly conserved, they protect the fertile soil from erosion; they render the landscape green and beautiful. But when forests are neglected and gradually destroyed, the wealth of Our land is progressively reduced and the country slowly becomes bare and barren.” Selected Speeches of HIM Negus Haile Selassie, page 483-4
“During the past year, the abrupt cessation of rainfall during the growing season caused considerable damage to Ethiopia’s crops. This experience has demonstrated that it is essential that the rivers of Our country be devoted to irrigation, so that the food needs of Our ever-growing population will no longer be left at the mercy of the whims and caprices of the elements.” Selected Speeches of HIM Negus Haile Selassie I, page 485
‘Experts have forecast that today’s rapid population growth will have far reaching consequences in the future. Food production is envisaged to fall short of the need of the world population, thus threatening mankind with the scourge of hunger. As We have said in the past, a view which is shared by many, Ethiopia, besides satiating her local needs, could also become the granary of her neighbouring countries, provided her agriculture is fully developed through modern means. Therefore, it is necessary for Us to continue Our endeavours to improve on our agriculture so that We can realize and develop our great potentials in this regard.’ Important Utterances of HIM Haile Selassie I, page 156
‘The soil of Ethiopia is a fertile soil. And it is loyal and dependable. Given but the proper attention and care, the Ethiopian soil remains, however much it is tilled, a dependable source of livelihood and dignity and wealth. It is thus ill-advised and indeed unreasonable to abandon the honourable and rewarding livelihood of farming in quest of other forms of employment in urban areas. A renewed dedication and diligence in farming would surely be a venture of more rewarding and lasting value.
It is not only that Ethiopia is ideal for the development of agriculture but the preponderant majority of its people also happen to earn their livelihood from farming. Draft legislations aimed at accelerating the tempo of agricultural development have been therefore prepared, following a thorough study of the existing systems of land administration and tenure in the various governorates-general.’ HIM Negus Haile Selassie I
‘In our own times, there are those expansionists who by shedding blood, desire to achieve their ambition and by dismembering themselves they are seen as tools for alien interests. Our people from Ethiopia shed blood, to save them from disintegration. Those personalities who believe in freeing a country by secession are selfish and prey to outsiders. We will not accept their motives.’ Selected speeches of HIM Negus Haile Selassie I, page 426
“The fundamental obstacle to the realisation of the full measure of Ethiopia’s agricultural potential has been, simply stated lack of security in the land. The fruits of the farmer’s labour must be enjoyed by him whose toil has produced the crop.” Selected speeches of HIM Negus Haile Selassie I, pages 492-3
“The aim of those leaders that is based on ambition for power and personal gain is one with no firm foundation and will, consequently, crumble easily.” Selected Speeches of His Imperial Majesty Haile Selassie I, page 471
“Every structure must be built on a solid foundation, for those constructed otherwise would soon collapse. The proclamation by which We made land grants to the entire Ethiopian people is the foundation of this scheme.” Selected Speeches of HIM Haile Selassie I, page 487
Long Live the Constitutional Monarchy!
Long Live African Unity!
Long Live the Charter of the United Nations!
Bless the Ethiopian committee of the Freedom from Hunger Campaign!
Fire burn down the alien imposed federation star of secession
Rise with the Lion of Judah!
Gasha for Ethiopians!
Long Live Independent Ethiopia!
Ethiopia “the world’s last Albanian-type Marxist state”
That was so true
In Ethiopia, the Association of Ethiopian Microfinance Institutions (AEMFEI) which initially was established by four microfinance institutions (MFIs) namely Dedebit Credit and Saving Institution S. Co. (DECSI), Amhara Credit and Saving Institution S. Co. (ACSI), Oromia Credit and Saving Institution S. Co. (OCSSCO) and Omo Microfinance Institution (OMFI) has grown in to a 27 member MFIs Association. This can be taken as a witness of how this sector is thriving.
In 2009 Forbes Magazine has listed the top 50 Microcredit Institutes worldwide. Accordingly Amhara Credit and Saving Institute (ACSI) and Dedebit Credit and Savings Institution were listed 6th & 31st respectively. However Desta, Asayehgn, (Ph.D), Distinguished Professor of Managerial Economics, Dominican University of California labeled Forbes’s study that listed the Top 50 MFIs as ‘’anecdotal rather than a study based on a rigorous empirical assessment of the repayment rates and it hardly focuses on whether or not microcredit programs have improved the lives of the marginalized participants or beneficiaries’’.
The idea even got its very own United Nations year in 2005.
Though this idea of lending money to the needy grew so popular, some of its biggest proponents are now wringing their hands over the direction it has taken. Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.
With regard to ‘’loan sharks’’ drawn by the sturdy profits Mr. Yunus said at a gathering of financial officials at the United Nations “We created microcredit to fight the loan sharks; we didn’t create microcredit to encourage new loan sharks, Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.”
The brawl over safeguarding the field’s saintly aura centers on the question of how much interest and profit is acceptable, and what constitutes exploitation. But still the noisy interest rate might lead one to suspect that microcredit institutions are scamming the poor.
Underlying the issue is a ferocious debate over whether microloans in point of fact haul up people out of poverty, as their promoters so often claim. The recent conclusion of some researchers is that not every poor person is an entrepreneur waiting to be discovered, but that the loans do help cushion some of the worst blows of poverty.
“The lesson is simply that it didn’t save the world,” Dean S. Karlan, a professor of economics at Yale University, said about micro-lending. “It is not the single transformative tool that proponents have been selling it as, but there are positive benefits.”
Though the success stories about MFIs are flooding from all corners of the planet, many are the proponents of the Microfinance concept. Some believe that the question ‘’If microfinance is about serving the poor, why does the provision of financial services need to be profitable?’’ is rebuttable. Some practitioners try to justify why institutions need to be profitable in order to cover the costs of reaching out and meeting the demand of underserved segments of the population over a sustained period of time. In addition, after a series of very small loans, a micro-entrepreneur often wants to expand his/her business; a microfinance institution must keep up with the demand for larger loan amounts so businesses can grow into small enterprises.
Moreover, the interest rate is only a small part of their overall transaction cost of credit, and if microfinance institutions offer credit on a more accessible basis, substantial costs in terms of time, travel, paperwork, etc. can be reduced, thus benefiting the poor.
A long series of studies has shown that many programs that charge subsidized interest rates end up using rationing mechanisms to distribute credit in response to excess demand. These mechanisms cause the borrower to have to “jump through hoops”; increasing the time and money s/he must put out to get the loan. In fact, these transactions costs are frequently higher than the interest costs, which take away the advantage to the borrower of the interest rate subsidy.
However, while increased access to credit for the poor on a long term and sustainable basis can bring significant benefits, MFIs must continue to work to improve efficiency levels, and to increase scale. This will bring down the cost of providing loans, and the benefits transferred to the poor in terms improving loan products, better access to loans, and lower borrowing costs.
The rationale and objective of advancing micro-loans to the ultra poor is to improve their liquidity constraints, create employment opportunities, and induce sustainable incomes by engaging the poor in the reinvention of everything from the bottom-up, with limited top-down directives.
But still, its earliest proponents do not want its reputation tarnished by new investors seeking profits (by making the poor pay a lofty interest and/or transaction costs) on the backs of the poor; though they recognize that the days of just earning enough to cover costs are over.
These proponents also argue the idea of the calculation of Microcredit interest rates set with the aim of providing viable, long-term financial services on a large scale, while subsidized interest rates generally benefit only a small number of borrowers for short period as a pretext.
This approach to breadth of outreach is based on a long-term view of microfinance services and the belief that, in many cases, there is a limit to depth of outreach. This approach thus accepts a trade-off between sustainability and reaching very poor people.
Other practitioners argue that microfinance should make reaching very poor people a priority because credit is a human right in the fight against economic exclusion. This approach requires narrow targeting of very poor people. Both breadth and depth of services are very important for the microfinance industry. What has become apparent, however, is that very poor people are unlikely to be served by microfinance programs unless these programs are intentionally designed to reach them.
There are three kinds of costs the MFIs have to cover when it makes microloans. The first two, the cost of the money that it lends and the cost of loan defaults, are proportional to the amount lent. The third type of cost, transaction costs, is not proportional to the amount lent.
After all the poor is in need of credit facilities. It could be for a new tool, a machine, or a shop in the marketplace—to launch new enterprises, create jobs and help economies to flourish. Poor people have proved time and again that they are able to repay these loans on time, though repayment doesn’t necessarily co notate there are people escaping from the shackles of poverty.
There is an ongoing debate whether credit alone or credit plus is needed for poverty reduction. There are views that credit alone on its own is inadequate to fight poverty. The need for other services is also important in this respect. Such views, although, do not negate the role of credit; fail to appreciate the role of credit on its own merit.
Though the institutes have grown tremendously and profitably is the poor benefiting from their services? This is the question fuming debate by many practitioners.
Currently, no concrete tool for measuring the poverty level of MFI clients exists. Most of the practitioners believe that credit plays a vital role as an instrument of intervention for a poor person to discover his/her potential and to gait for a well again living. Muhammad Yunus advocates that Credit is a human right. Once this right is established, he argued – ‘‘The entitlement to other rights for leading a dignified life becomes easier’’. It empowers to break the vicious cycle of poverty by instantaneously creating self-employment and generating income.
When in the ultimate analysis nothing can be said to be cure-all, by overemphasizing that micro-credit is not a panacea is in a sense overreacting and underestimating the role of credit as an instrument to combat poverty. Micro-credit is itself a very powerful tool. But if it is combined with others, it is definitely more empowering.
According to the Association of Ethiopian Microfinance Institutions (AEMFI), until December 31st 2008 there were 2,220,901 active clients, with an outstanding loan of 4,606,885,776 ETB and a total saving of 1,575,635,740 Birr with in the 27 member MFIs of the association. The total asset of the 26 members of the association has reached 5,462,578,130 Birr and total liability of 4,061,476,516 birr and total capital of 1,401,101,614 birr.
Though this industry is flourishing and access to money is by far becoming near to the poor, the link with Micro and Small Trade and Industry Promotion Agencies, and Local Technical and Vocational Training Centers or even Farmers’ Training Centers (FTCs) and Community Skills Training Centers (CSTCs) is the weak link in the chain.
It is not the amount of money lent by Microfinance institutes that matters most. What matters most is the change in the lives of the poor and in fact the poorest of the poor. The tangible change that is the rise in the number of people above poverty line can rise when the ability of the poor in assessing profitable business opportunities and developing business even literacy and innumeracy is not the case anymore, communication skills, life skills, business skills etc are mastered by the poor. This should have to be and can be inculcated as an add-on component in an integrated manner by the CBOs mentioned above.
Otherwise the role of MFIs is like doling out financial relief to the poor. This is like “the canaries in the mines.” for Governments and other practitioners. Coal miners in England and the United States took these small birds into the mines. The reason was because they would normally sing almost constantly but when poisonous gases began to overwhelm them they would stop singing, thereby warning the miners of danger.
Now that we have MFIs, realizing the ‘’Credit right of the poor’’, but is there any mechanism/s that pledge the credit right has enabled – ‘’the entitlement to other rights for leading a dignified life’’? Breaking the vicious cycle of poverty, instantaneously creating self-employment and generating income?
Good. I found something to put my hands on.
I will grab this farm out of this old guys hand. It is our time and Power is in our hand. We are doing whatever we want to do.
Foget about democracy and fairness. If anyone gets between us and wealth we will fight to death.
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