Ethiopia is the second largest number of microfinance users in sub-Saharan Africa Ferdisa

(2012)(cited in Ahemed,2013). In Ethiopia Micro credit started in 1980s by some NGO groups
as the relief and rehabilitation program.

With this background, the study will be designed to identify and analyze the impact of
microfinance to reduce unemployment in Oromia region, North shawa Zone, Debre Libanos
Worreda, Sherero Town and through that to keep oneself aware of the surrounding environment
and find out the suitable ways to keep oneself engaged along with some securities and make
recommendations to improve the effectiveness of interventions of Micro finance.

1.2. Statement of the Problem

A micro service has been provided since the 1970s. The reason behind is that the prevailing
formal financial institutions in many poor developing countries such as Ethiopia is inefficient in
providing sustainable credit facilities to the poor. The formal financial institutions like FM and
Insurances that could provide credit services for low-income entrepreneurs, handcrafters,
pastoral and farmer’s families are very limited in Ethiopia. The majority of the poor access
financial services through informal channels, Iqqub, mehabber, informal moneylender, relatives,
friends etc (Wolday, 2002). Another most important reason is that there is assumption that by
integrating the poor into productive economic activities, development would be promoted
automatically through micro finance (Aguilar, 1999). It is general truth that saving has immense
contribution for both clients and MFIs. For clients, savings help smooth consumption patterns
during difficult times by covering cost of large expenses such as school fees, medicals. For
MFIs, savings increase profitability.

Several studies indicate that microfinance has positive impacts in reducing poverty (Berhanu,
1999; Daba, 2004; Holcome, 1995; Hossain, 1988 and Teferi, 2000). Like other studies
indicate that it provides small scale financial services to the rural and urban poor people for self
employment and small business (Shete, 1999; Adebayo, 2009, Fiona, 1999;Ebimoboweietal,
2012: 41). On the other hand, there are studies that indicate pessimistic kind of result on the
impacts of microfinance program initiatives towards reducing poverty (Buckley, 1997;
Montgomery, 1996; Rogaly, 1996). Specific to Ethiopian context, even though there is success
in terms of outreach and size of clients weak management of information system, limited source
of loan able fund, problem related with entrepreneurial quality of clients, limited technical and