Microfinance Institutions Performance in Hadiya Zone, Southern Region, Ethiopia

Abstract

Microfinance institutions play a major role in poverty reduction by providing various financial services for the small-scale and medium enterprises which cannot afford to adopt new technologies and to startup new business activities from their own source. The aim of the study was to examine the microfinance institutions performance in Hadiya zone, southern region, Ethiopia. The study uses secondary and focused group discussions data of 14 Microfinance institutions operating in the zone. Descriptive statistics and econometric model were used to analyze the data. OLS model was used to identify the determinants of operating profit of microfinance institutions.  The findings of the study show the presence of the positive impact by total asset, number of borrowers, Education level, Number of active deposit account and Microfinance institutions experience (age) on the performance of Microfinance institutions in the zone. The study recommends that, due to the fast growth of the Microfinance sector in the country, with increases in small and medium Microfinance institutions, the government and policy makers should create a good environment for the growth of these institutions. Better policies should be create which to facilitate growth and hence the performance of Microfinance institutions in the country. To the managers of Microfinance institutions, the study recommend that, they should monitor the institution's growth to ensure that assets, number of borrowers, Education of staff, Number of active deposit account increase with firm performance.

Keywords: Firm Performance, Microfinance Institutions, multiple regression, Hadiya zone, Hosanna, Ethiopia