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Performance of Microfinance Institutions in Ethiopia: Integrating Financial and Social Metrics

Author

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  • Solomon Bizuayehu Wassie

    (Department of Agricultural Engineering and Socio-Economics, Kobe University, 657-8501 Kobe, Japan
    Department of Agricultural Economics, Bahirdar University, Bahirdar, Ethiopia)

  • Hitoshi Kusakari

    (Department of Agricultural Engineering and Socio-Economics, Kobe University, 657-8501 Kobe, Japan)

  • Masahiro Sumimoto

    (Department of Bioproduction Science, Ishikawa Prefectural University, 921-8836 Nonoichi, Japan)

Abstract

Since their inception in the 1970s, microfinance institutions (MFIs) have received increasing attention both from policymakers and academic circles. Using unbalanced panel data (2000–2017) from Ethiopia, in this paper, we investigated the performance of MFIs and its determinants on the one hand and whether or not mission drift exists on the other hand. To this end, we employed seemingly unrelated regression (SUR) and fixed/random effect panel models. The results indicate that, based on different outreach and financial performance metrics, the MFIs in Ethiopia have good performance compared with those of the 10 biggest economies in Sub-Saharan Africa (SSA). The econometric estimation results show that asset holding and the yield on gross portfolio have a positive and significant effect on the social and financial performances of MFIs in Ethiopia. Furthermore, the number of loan officers, loan officer productivity, and personnel productivity have a positive and significant impact on the financial performance of MFIs. Our results also suggest that the null hypothesis—that MFIs are not shifting away from poorer clients—cannot be rejected, implying that there is no mission drift by MFIs in Ethiopia.

Suggested Citation

  • Solomon Bizuayehu Wassie & Hitoshi Kusakari & Masahiro Sumimoto, 2019. "Performance of Microfinance Institutions in Ethiopia: Integrating Financial and Social Metrics," Social Sciences, MDPI, vol. 8(4), pages 1-13, April.
    • Handle: RePEc:gam:jscscx:v:8:y:2019:i:4:p:117-:d:221924
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    References listed on IDEAS

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    4. Van Duong Ha, 2020. "The Interactive and Causal Relationship between Productivity and Financial Sustainability of People's Credit Funds in Vietnam," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 9, January.

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