Financial Decisions, the Sustainability and Outreach Performance of Ethiopian Microfinance Institutions
| Title | Financial Decisions, the Sustainability and Outreach Performance of Ethiopian Microfinance Institutions |
| Publication Type | Journal Article |
| Year of Publication | 2011 |
| Authors | .K.Vashisht, A, Singh, K, Ejigu, L |
| Journal | Journal of African Development Studies |
| Volume | 4 |
| Issue | 1 |
| Date Published | 12/2011 |
| Keywords | Ethiopia, Financial Decisions, Microfinance, Outreach, Panel Data, Sustainability |
| Abstract | this study, using a relatively balanced panel data of 13 MFIs from the period 2003-
2008, tried to identify the financial decision variables that have an impact on the sustainability
and outreach performance of Ethiopian Microfinance Institutions (MFIs). All the data are
collected from the Microfinance Information eXchange (MIX), a platform dedicated to the
worldwide dissemination of quality microfinance data. Results indicated that all the included
capital structure variables (capital to asset, deposit to asset and commercial debt to gross loan
portfolio) have negative impact on Operational Self Sufficiency (OSS). Like Rhyne and Otero
(1992) study it is found that MFIs that mobilize public savings and access commercial debt can
increase their number of borrowers at a significant rate. MFIs that charge high interest rate
increase sustainability significantly probably because loan demand is interest-inelastic. MFIs
that have social mission (small loan size and more proportion of women clients) charge higher
interest rate, seemingly paradoxical at the onset but they do it possibly to cover their high cost of
reaching marginalized poor people. MFIs with high cost structure, as expected, have lower OSS
and finally social oriented MFIs have poor portfolio quality.
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