Determinants Of Financial Performance Of Micro-finance Institutions In Ethiopia

The study examined determinants of financial performance of 17 Ethiopian MFIs forrnperiod of 10 years (2009-2018). The study adopted a quantitative research approachrnand used secondary dataobtained from the annual bulletin of AEMFI and mix-marketrndatabase. The data collected was analyzed using descriptive and regression analysis.rnThe findings of the study established Portfolio at Risk 90, Operating Expense Ratiornand Debt-Equity Ratio insignificantly influence the financial performance of microfinancerninstitutions in Ethiopia. Whereas, Capital to Asset Ratio has negative significantrninfluence on financial performance; Loan to Asset Ratio and Cost per Borrowerrnhas positive significant effect on ROA. Based on the finding of the study capital to assetrnratio, asset allocation and cost per borrower are vital factors among others to determinernthe institutions’ profitability then sustainability. Thus the study recommendsrnthat MFI’s management should decrease capital-to-asset ratio up to optimum levelrnand increase loan-to-asset ratio. Since the study found positive relationship betweenrncost per borrower and profitability, MFIs in Ethiopia are beneficiaries if they lift uprncost per borrower dispensed for the good of their institutions and in order to increaserntheir financial performance.

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