Browsing by Author "Addisalem Gaim"

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    The Influence of Competition on Performance of Microfinance Institutions in Ethiopia
    (Addis Ababa University, 2015-06) Addisalem Gaim; Berhanu Habtamu
    The modern microfinance concept is broadening its target from poor clients that have no access to conventional financial services to the idea of financial inclusion. For this reason, commercial banks are downscale their operational activities to the poor to ensure financial inclusion by introducing new technology like mobile banking and these incidents have changed the tendency of competition which attract the attention of investors. This study examined factors that influence financial performance of MFIs in Ethiopian with special emphasis on competition. An econometrics tool (Eviews-7) is used to generate regression of the balanced panel data from 10 MFIs consisting of 100 observations, covering the periods started from 2005 – 2014, and provided the basis for the descriptive and regression analysis. Ethiopian MFIs are yet not financially self sufficient since the mean average of FSS is below breakeven point (100 percent) which is (96.5 percent), this indicated that if subsidy from government or donors might stop at any time; the MFIs would unable to cover their financial and operational costs through their operating revenues. The results indicate that MFIs’ financial performance is negatively and significantly influenced by the market concentration ratio, PAR>90 days and operational expense ratio/operational efficiency. Thus, operational efficiency, portfolio quality and competition are important factors of MFIs’ financial performance in Ethiopia. The competition has direct impact on the performance of microfinance in Ethiopia so the regulatory body needs to relax the criteria for new entry to the market. MFIs in Ethiopia are high cost sensitive so the boards and senior management of respective MFIs must give due attention to the cost management of MFIs