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Ethiopian Micro-Finance Landscape Report
Finance is one of the key elements addressing development issues in Ethiopia. It plays a leading role in guiding development interventions in the country. Development strategies or programs (poverty reduction strategy, rural development strategy) require finance and financial systems to support implementation. To develop an inclusive financial system in the region, there is a need to have well-functioning financial system and institutions in place. In order to increase outreach, expansion of branches, efficiency, inclusiveness, appropriateness, innovations and sustainability, there is a need for interventions/support by banks, microfinance and RUSSACOs/SACCOS providers.
This assessment focuses on the landscape and performance of microfinances (MFIs) in Ethiopia. Microfinance refers to a broad range of financial services made available to low-income clients, particularly women. The services include loans, saving, insurance, and remittance. The clients of microfinance institutions (MFI), largely belonging to low income households, have limited access to formal financial services. MFIs serve a market segment that is considered ‘high-risk’ by formal banks. Small households have fluctuating incomes, few assets and require very small loans, a high degree of close follow-up and business appraisal. Financial transactions with this client base calls for careful appraisal and close post-disbursement follow-up. MFIs offer much needed financial service mainly to the informal sector which would otherwise depend on exploitative moneylenders.
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The performance of Micro Finance Institutions in Ethiopia: A case of six microfinance institutions
One of the most stylized facts of developing economies is that formal financial institutions leave the poorest population tightly constrained in their access to financial services. It is also widely recognized that economic progress relies largely on access to financial services such as savings, insurance, and credit. Where formal financial institutions fail the large majority of the poor population, there is evidence to support the proposition that microfinance
Micro finance being practiced in many developing countries to address the low income society and thereby to improve their livelihood. Ethiopia is also one of the countries where microfinance has been given due consideration as a safety net for the poor to help them to overcome the adversities of poverty. This research aimed to study the financial operating performance and challenges of OMO and WISDOM microfinance institutions in Dilla town, Ethiopia The findings of this study revealed that Provide small business training to the clients, a high interest rate charged on loan, lack of skill of the clients on the fields (sectors), client marketing problems and the loan size given to the clients were too small were the main challenging areas hampering the performance of MFIs in Dilla Ethiopia. The study made recommendations which are aimed to enhancing the operating performance and solves challenges of OMO and WISDOM microfinance institutions.
DR. MD S H A R I F HOSSAIN
Microfinance is a form of banking service providing financial support to unemployed or vulnerable groups. The microfinance models emphasise on alleviation of poverty and women empowerment by improving financial access and services. However, the positive impacts of microfinance institutions on the welfare of the poor are sustainable only if the institutions achieve a good financial performance. The aim of this study is to identify factors affecting financial sustainability of MFIs in Bangladesh. The study followed an econometric research approach using an unbalanced panel data set of 145 observations from 29 MFIs over the period 2008-2012 in Bangladesh. Among the 29 MFIs only 4 MFIs have found less than 100% FSS. The study found that capital assets ratio, operating expense and write-off ratio affect the financial sustainability of MFIs in Bangladesh. However, MFI size, Age of MFI, borrower per staff members, ratio of savings to total assets, debt equity ratio, outstanding loan to total assets and percentage of female borrowers had no significant impact on financial sustainability of MFIs in Bangladesh during the study period.
Asian Social Science
Economics World ISSN 2328-7144
The purpose of this paper is to study the factors determining the performance (organizational, social, and financial) of conventional and Islamic microfinance institutions and their impact on maintaining the sustainability of these institutions. A panel data on a sample of 333 conventional and 49 Islamic microfinance institutions (MFIs) between 1996 and 2012 of six different regions is used for this purpose and analyzes using the simple linear regression technique. The results show that the sustainability measered by operational autonomy (OSS) of Islamic MFIs (IMFIs) is sensitive to their social performance (SP), while the sustainability of Conventional MFIs (CMFIs) is sustained by their Financial Performance (FP) measured by return on assets (ROA). Thus, these latter seem to deviate from the main social objective focusing more on profitability. Indeed, this judgement is confirmed when the results also showed that their (CMFIs) FP is positively affected by the quality of credit portfolios which reveals the category of the targeted clients (the poorest of the poor are abandoned). On the contrary, FP of IMFIs seems to be mainly supported by their specific source of funding through the islamic financial contracts where the results revealed that their profitabilty is positively affected by their capital structure. Moreover, the results show that the organizational performance positively affects the sustainability of the two categories of MFIs.
Microfinance institutions contribute a lot in reduction of poverty by providing access to finance to the poor's. The purpose of this paper is to identify those factors that have significant impact on financial sustainability of microfinance institutions in Pakistan. Panel data analysis is used as a technique to analyze the data of 49 MFIs in Pakistan. The results show that Size of MFIs, Capital to Asset ratio, Yield on Gross Portfolio, Operating Expense to Asset ratio and Portfolio at Risk are found to be important factors in determining financial sustainability of MFIs in Pakistan. However, Breadth of Outreach, Cost per borrower, Capital structure, Productivity and Debt to Asset ratio shows insignificant impact on financial sustainability that means these variables have no significant association with finacial sustainability of microfinance institutions in Pakistan. INTRODUCTION This research paper is to analyze those factors that are affecting the financial sustainability of Microfinance Institutions (MFIs) in Pakistan. Financial sustainability of microfinance institutions is probably the key dimension of microfinance sustainability. It refers to the ability of MFIs to cover all its costs from its own generated income from operations without depending on external support or subsidy. In this study, Depth of Outreach, Cost per Borrower, Size of MFIs, Capital Structure, Capital to Asset ratio, Yield on Gross Portfolio, Operating Expense to Asset ratio, Productivity, Portfolio at Risk and Deposit to Asset are used to analyze the effect of these on financial sustainability of MFIs. Poverty is the main issue all over the world especially in under developed and developing countries. Banks and the governments of the countries make efforts to reduce the
Journal of Scientific Research and Development
Bashar Bhuiyan , Iftekhar Ahmed
This study aims are measure the profitability and compare the profitability and accountability of microfinance institutions (MFIs) in South Asia. This study adopted a quantitative research approach using secondary data of six MFIs from six countries of South Asia from 2008 to 2012. The data were collected from the Microfinance Information Exchange database. We employed financial ratio analysis, descriptive statistical analysis, and the econometric technique, considered the various performance indicators that have been standardized by the Consultative Group to Assist the Poor to measure the financial performance or the profitability of MFIs. Results showed that yield on gross loan portfolio and the number of active borrowers has significant positive effects, conversely, ages and operating expense ratio have significant negative effects on financial performance. Liquidity ratio has been shown as insignificant, but a positive relationship and cost per borrower was found to have no relationship with the profitability of MFIs. Thus, the study suggests reconsidering the interest rate charged by MFIs as this is one of the major barrier for client's loan repayment. MFIs should also maintain close relationship with borrower to keep them active, for instead, institutions can provide deposits or savings scheme for clients. However, some countries might have regulatory framework that unauthorized deposits service from borrowers.
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