Role and Challenges of Micro Finance Institutions in Creating Job Opportunity A Case of Jimma Town Micro Finance Institutions

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.