Loan Disbursement and Collection of Microfinance Institutions in Bale Zone

Abstract

Microfinance institutions (MFIs) in Ethiopia are considered as one of the crucial policy instruments. Even though they have shown a remarkable growth in outreach and performance in the last 20 years, still they are unable to meet the ever growing demand for loan and insurance service owing to the current loan disbursement and collection constraints in the study area. Despite its importance of such types of study was not investigated in the study area. The objective of this study was therefore to assess the loan disbursement and collection performances of microfinance institutions in Bale zone. Data was collected from 340 randomly selected households. Questionnaire and interviews were used to collect data from respondents. Purposive and stratified random sampling techniques were used to select the required sample size of sample officials and clients, respectively. Secondary data was also employed from three fiscal periods, 2005-2007 E.C. The study found that there was improvement on the loan disbursement and collection of the financial institutions. However, women participation in the study area was found to be significant. Based on the findings the study recommends that the MFIs along with other stakeholders should be encouraged to solve the loan disbursement problems of clients, improve loan size and extend the credit period and reduce the interest rates charged on loans.

Keywords: Microfinance, Loan Disbursement, Trend analysis, Bale zone