The Effect Of Branch Expansion In Microfinance Profitability Evidence From Panel In Ethiopia

The study investigates the effect of branch expansion in microfinance profitability which is measured as a rate return on asset. The study used panel data from 24 microfinance institutions over 9 years. In particular, it employed a regression analysis and a dataset covering nine years (2010 to 2018) to examine the relationship between profitability and its branch expansion. The random effect model estimation technique is used to answer the research question and achieve the objectives.rnThe major finding of the study is that the Rate of Return on asset is positively affected by the number of branches, loan advanced and number of employees and size. And, the general expense, deposits, and ownership showed significant negative effect on Return on Asset.rnThe policy implication of this study is that, for microfinance to improve the rates of return on assets they have to expand their number of branches, firm size and they have to increase loans, and employed more qualified employees. However, to improve their rates of returns, the microfinance institutions must reduce their deposit at bank, general expenditure and ownership.rnThe future research direction shall include detailed investigation of factors affecting demand for microfinance loans and characteristics of the borrowers. The result of this study shall serve as a reference point for further investigations.

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