Factors Affecting the Performance of Microfinance Institution: The Case of Selected Microfinance in Addis Ababa
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Date
2023-01-14
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Publisher
AAU
Abstract
MFIs are the backbone of many economies and hold the key to possible revival of economic
growth and the elimination of poverty on a sustainable basis. Despite their role in the economy
recently microfinance has a big problem finding a perfect way to perform efficiently. The aim of
this research is to assess those factors (internal control system, leadership style, firm’s
characteristics and employees related issues) affecting the performance of microfinance
institution in Addis Ababa. This research is necessitated due to the limited literature on the
assessment of those factors chosen on this study that affects performance of microfinance in
Ethiopia specifically in Addis Ababa. The study adopts inferential analysis method in addition
with the descriptive research design. The population of the research is 431 by assuming to select
at least 1 respondent from each 431 branches. A total of about 70 employees (manager) in
various branches in Addis Ababa are selected as sample for the study representing about 16.2%
of the population. The study collects the data using Self-administer questionnaire with a five
point likert scale by addressing all the issues. The research used random sampling technique to
distribute the questionnaires. Furthermore, descriptions are made based on the results of the
tables. Finally, in this study, several hypotheses and conceptual framework were developed on
the bases of background literature and those hypotheses are tested by applying reliability
statistics, One-way ANOVA, and Multiple Regression Analysis to draw a conclusion. The result
show that internal control system and leadership style has positive moderate significant
relationship with performance of microfinance institution, and there is a statically significant
positive relationship between firm’s characteristics and performance of microfinance institution,
while employees related issues has statically strong significant positive relationship with
performance of microfinance institution. The study conclude that the performance of MFIs is
affected by various factors. To ensure their success and sustainability, MFIs need to focus highly
on structured related, market related and capital related firm’s characteristics. Also MFIs has to
focus on internal control system and leadership style in addition to the employees related issues.