Factors Affecting the Performance of Microfinance Institutions: The Case Study of Jimma Town

Abstract

Currently micro financing has become one of the most powerful development tools for combating poverty primarily by providing loan to the poor section of the society. The study was aimed to assess the factors (institutional, clientele, economic, legislative and regulatory framework) affecting the performance of microfinance institution in Jimma town, Ethiopia. The study was adopted descriptive and inferential research design. The study was targeted 8 employees working with Ishet microfinance institution in Jimma town and 127 sample borrowers were selected from the 190 total borrowers served by these selected microfinance institution and the interviews was included the managers. Samples of respondents were drawn using stratified random sampling. Both quantitative and qualitative approaches were used for data collection and analysis in the study. Data collected through interview questionnaire was analyzed using SPSS. The findings were apparent that most of the employees working with microfinance institution have not adequate skill, trainees on technology, not provide good service and training to clients. The study found that microfinance institution charge higher interest rates than commercial banks and low women participation. The study recommended that microfinance institution should continuously inform their employees on technology; minimize lack of technology and other financial matters. Microfinance institution should ensure that there was no huge disparity between the interest rates they charge and those ones charged by other lending institutions. Microfinance institutions should insure in Implementation of different methods to improve women's participation in micro credit and saving services.