Ethiopia: Small loan project "lights up" a town

15 Dec 2010

image Local Economic Development projects help youth group and members of community associations start new income generating activities. (Photo: UNDP/ Kurumi Shiratori)

A United Nations Development Programme (UNDP) project providing start-up costs for community-level income creation in Ethiopia has helped up to 5,000 people, mostly from poor and vulnerable groups, to gain new skills and find work during the last year.

UNDP’s Local Economic Development (LED) project, designed as part of Ethiopian government efforts to achieve the Millennium Development Goals, last year approved an initial loan of about US$243,000 to the local authority of Wolyta Sodo town in southern Ethiopia.

A group of seven unemployed young people in Wolyta Sodo - one of seven towns in four LED regions - successfully completed a training course in entrepreneurship skills and received a loan equivalent to US$15,000 to develop a business.

After training in business planning and management, simple accounting, marketing and leadership skills, the group set up a cafeteria and youth recreation centre that turned a profit of US$1,400 during the last few months, some of which goes towards loan servicing, and some invested back into the cafeteria operations.

The initiative, involving local government, the private sector and civil society, paid off especially for those who could not get a formal education like one Sodo resident, 20-year old Abonesh Dejene, who could not afford the fees to stay at school.

Dejene was dependant on her parents who had three other children to support on a meagre income. When she started work at the recreation centre, she was the only female in the seven-member group, all of whom had dropped out of school.

For the equivalent of US$30 a month, Dejene worked in the cafeteria and other areas of the centre, cooking, cleaning and serving guests. Some of her colleagues at the centre used the facilities to build wooden furniture and organize sporting events.

“Light is coming out of my city,” said Dejene. “I am grateful to my colleagues who are working with me in the cafeteria. Even though I’m the only female, they give me support and also escort me home at night after we finished work.”

With the money she earns from the cafeteria, Dejene has returned to school and adds to her family’s income. She divides her time between daytime study and evening work, and she is now determined to start her own business.

Micro-credit projects such as LED, which has a total budget of US$10 million for the period 2009-2012, are an important plank in the country’s five-year national development strategy which aims to speed up progress towards development goals through job-led and income-rich economic growth.

During the past five years, Ethiopia has shown high economic growth of 11 percent and has reduced poverty levels from 32.7 percent in 2008/2009 to 29.2 percent in 2010. Primary school enrolment for girls has risen to 90.7 percent since 2009.