Abstract:
The objective of this study was to investigate the role and challenges of microfinance institutions
in creating job opportunity in Jimma town. The descriptive type of study is used to obtain
information concerning the role of microfinance institutions in creating job opportunity and to
draw conclusions from the facts that are discovered. Both primary and secondary data were
employed. Primary data were collected through a questionnaire administered to clients of Jimma
town MFIs and face-to-face interviews were conducted with three MFI officials (employees and
branch managers). Secondary data were gathered from MFIs’ reports. The approach used in
this research was a mixed research approach which makes the use of both quantitative and
qualitative descriptive methods. Both probability and non-probability sampling techniques are
used to collect data at different stages. First purposive sampling was used to select the Jimma
town due to the town accessible to the researcher.
The researcher also used probability sampling method which is simple random sampling
techniques to obtain fruitful information from clients. A structured questionnaire was prepared
for randomly selected of 360 of clients of Jimma town microfinance institution. Data collected
from the questionnaire are analyzed, summarized, and interpreted accordingly with the aid of
descriptive statistical techniques.
The findings of the study indicated that MFIs play a role in improving the socio-economic
condition of the clients since they create employment opportunity that enables them to generate
their income which in turn leads to access to socio-economic merits. The study revealed that the
respondents, who did not have a job before joining microfinance institutions, currently
permanently employed and created the job opportunity for others.
The study concluded that MFIs has a great role in reducing unemployment of the town by
providing credit and saving for those who have low-income people and job seekers. The study
also identified that the major constraints to use the credit are a high-interest rate of the loan, low
amount of loan, group lending, shorter period of repayment and too much paperwork.
Based on the findings, recommendations and suggestions were forwarded. MFIs should revise its
policy related to the loan repayment period, its high-interest rate on loan, a small amount of
loan, its low-interest rate on saving etc.
