Factors Affecting Performance of Microfinance Institution in Bale Zone, Oromia Region

Abstract

Currently micro-financing has become one of the most powerful development tools for combating poverty primarily by providing loan to the poor section of the society. Owing to this, the number of micro financing institutions serving the poor in Ethiopia has grown to over 32 with in short period of time. The growth and expansion of microfinance programs and an increasing attention to microfinance as a poverty reduction strategy has given rise to a number of questions. The main objective of the study is to examine factors that influence the performances Microfinance institutions in Bale Zone. Primary data were collected from 389 household heads through Structured and unstructured interview. Secondary data were mainly collected from three years threes (2005 to 2007) annual reports of the selected MFI. The study used both quantitative and qualitative methods of data analysis. The result revealed that lack of experience of employees, inadequate trained manpower and lack of efficient system to enforce contracts as the main factors influencing the performances of MFIs in the study area. In order to reduce the challenges, continuous and need based capacity building programs should be put in place.

Keywords: descriptive study, performance factors, Micro finance, Bale Zone, Oromia Region.