Analysis of Microfinance Institutions Performance: The Case of Jimma Town MFIs

Abstract

This research assessed the performance of microfinance institutions in case of Jimma town considering; outreach (breadth of outreach) and client poverty level (depth of outreach), loan repayment (collection performance or portfolio quality), Efficiency and Financial sustainability (profitability), that determine the performance of financial institutions in terms outreach and its financial sustainability. The objective of this study is to examine the overall financial and operational performances of the Oromia Credit and Saving Share Company (OCSSCO), Eshet Microfinance Institution (EMF.S.C) and Harbu Microfinance Institutions (HMF.S.C) for the recent five years (2012-2017). The paper is used both primary and secondary data sources which were analyzed using qualitative and quantitative methods applying a descriptive analysis. Semi-structured interview was done with the key officials of the institution at the head office level, employees, and clients. Besides, a review of documents –both financial and non-financial also used for the investigation. The major findings of the study indicate that three major selected MFIs are progressing in terms of its breadth and depth of outreach. From the financial sustainability point of view, those MFIs have been gone up the ladder of sustainability measures over those five consecutive years. The institution also manages its loan portfolio as shown by the ratio of portfolio at risk (PAR) which is greater than 30 days that declined throughout the years. Since the institution spends least costs in its operating and administrative expenses for serving and providing loan to a single client, the trend in this regard showed that the three major selected MFIs is cost efficient.

Keywords: Micro Finance Institution, Sustainability