Efficiency Of Microfinance Institutions In Ethiopia

The main objective of this study was measuring the level of efficiency ofrnMicro finance institutions in Ethiopia. This thesis analyzes the efficiency ofrnEthiopian Microfinance institutions using Data Envelopment Analysis.rnOperational and financial models are employed in order to examine thernefficiency level of the institutions. It has been identified that the meanrnoperational efficiency of the Microfinance institutions are found to be morernthan the mean financial efficiency. The results also indicated that only onernMicro finance institution, out of twenty, is found to be both financially andrnoperationally efficient as compared to its reference sets. Moreover, it hasrnbeen identified that the efficiency scores of Ethiopian MFls highly dependsrnon the age and total assets of the institution and it is negatively related to thernreturn on assets invested. The model used shows that most of the MFls inrnEthiopia are at an increasing return to scale efficiency and this implies thatrnthey have a room to further increase their efficiency level. To sustain thernmicro finance industry in Ethiopia, the management of each MFI shall givernemphasis on both operational and financial efficiency in particular and thernoverall efficiency of the industry in general.

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