THE PERFORMANCE OF ETHIOPIAN MICROFINANCE INSTITUTIONS, CHALLENGES AND PROSPECTS

The objective of this study is measuring the performance of Ethiopian microfinance institutions (MFIs) and assessing challenges and prospects of the sector by using 15 sample MFIs over the period between 2003-2009.The performances of the institutions was measured by the most widely applied performance indicators that is developed by the Small Enterprise Education and Promotion Network (the SEEP Network) and Consultative Group to Assist the Poor (CGAP). The finding of the study revealed that the sector outreach in terms of number of active client and gross loan portfolio increase at decreasing rate and the percent of women participation is limited. In addition, it is proofed that most of the Ethiopian MFIs are operationally self-sufficient but not financially sustainable and profitable. Based on the Pearson correlation the study discovered that there is a strong positive association between number of active clients and operationally self-sufficient. Since most of Ethiopian MFIs give group based loan it will be good for them to continue this tradition so as to decrease operational cost per borrower and to increase the number of clients