Efficiency of Microfinance Institutions in Ethiopia
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Date
2007-07
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Addis Ababa University
Abstract
The main objective of this study was measuring the level of efficiency of
Micro finance institutions in Ethiopia. This thesis analyzes the efficiency of
Ethiopian Microfinance institutions using Data Envelopment Analysis.
Operational and financial models are employed in order to examine the
efficiency level of the institutions. It has been identified that the mean
operational efficiency of the Microfinance institutions are found to be more
than the mean financial efficiency. The results also indicated that only one
Micro finance institution, out of twenty, is found to be both financially and
operationally efficient as compared to its reference sets. Moreover, it has
been identified that the efficiency scores of Ethiopian MFls highly depends
on the age and total assets of the institution and it is negatively related to the
return on assets invested. The model used shows that most of the MFls in
Ethiopia are at an increasing return to scale efficiency and this implies that
they have a room to further increase their efficiency level. To sustain the
micro finance industry in Ethiopia, the management of each MFI shall give
emphasis on both operational and financial efficiency in particular and the
overall efficiency of the industry in general.
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Keywords
Microfinance Institutions