Hussien, Mubarek Sani (2006) Sustainability of Ethiopian Microfinance Institutions: The Case of Omo Micro Finance Institution, (OMFI) Sidama Microfinance Institution, (SMFI) and Addis Credit and Saving Institution (AdCSI). Masters thesis, Addis Ababa University.
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Abstract
In recent years the growth and expansion of microfinance programs and increasing attention to microfinance as a poverty reduction strategy has given rise to a number of questions. What is the interrelationship between scalingup outreach and financial sustainability of MFIs? Are outreach and financial sustainability positively related or is there direct trade off between the two? What are the factors that are necessary for strong outreach and financial viability? The case of three institutions namely, OMFI and SMFI operating in the Southern Regions and AdCSI, in Addis Ababa were used to respond to the above questions. The main objective of the study is to asses the relationship between outreach and financial sustainability and draws conclusions and make recommendations for improving the financial sustainability of the MFIs. The study used both quantitative and qualitative methods to obtain information on outreach and financial performance of the three sample MFIs. Primary data were collected through semi structured questionnaires and observation of the researcher. Focus group discussions were held with the clients of the sample MFIs. Detailed discussions were held with employees and executives of MFIs. Secondary data were mainly collected from audited financial statements. Finally, adjustments to financial data were made and the performances of the MFI were measured by taking selected indicators. The results of the study revealed that the three sample MFIs have achieved extensive outreach. The volume of saving as well as the gross loan portfolio has grown significantly. The participation of women in three sample MFIs was also encouraging. All sample MFIs under study have not achieving the level of financial selfsustainability. However, the trends of their financial performance demonstrate that there is a good and steady progress towards reaching operational self-sufficiency in the three MFIs. Both AdCSI and OMFI already achieved operational self-Sufficiency. The results of operation demonstrate that with the increase of outreach, operational self-Sufficiency has increased. Institutional capacity was identified as the driving force to attain outreach and sustainability in the sample MFIs. Over all, the outreach and financial sustainability of the sample MFIs has grown significantly. However all sample MFIs did not achieve financial self-sufficiency. The main constraints in improving outreach and financial sustainability of MFIs in Ethiopia are: - Lack of experienced and competent board of directors, lack of customer responsive lending mechanism and service design, shortage of commercial loanable fund for future expansion, Lack of trained manpower and efficient legal system to enforce contracts and low interest rate are identified in this study. In order to improve, outreach and financial sustainability of microfinance industry, the importance of designing client centered financial service provision, the need to have competent board of directors and management body is emphasized. Furthermore, the importance of having human resource development strategy, presence of reliable management information system, putting in place an efficient legal system to enforce contracts and adjustment to lending interest rate has been recommended. It is only a financially viable MFI that delivers flexible financial services to the poor that have significantly contributed to poverty reduction. Moreover, all development stakeholders should work together with the microfinance programs, since it is only through working together that we can tackle the development challenges of Ethiopia.
| Item Type: | Thesis (Masters) |
|---|---|
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HT Communities. Classes. Races |
| Divisions: | Africana |
| Depositing User: | Tim Khabala |
| Date Deposited: | 28 Aug 2018 12:28 |
| Last Modified: | 28 Aug 2018 12:28 |
| URI: | http://thesisbank.jhia.ac.ke/id/eprint/8452 |
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