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Soc. Sci. 2019, 8(4), 117; https://doi.org/10.3390/socsci8040117

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

1
Department of Agricultural Engineering and Socio-Economics, Kobe University, 657-8501 Kobe, Japan
2
Department of Agricultural Economics, Bahirdar University, Bahirdar, Ethiopia
3
Department of Bioproduction Science, Ishikawa Prefectural University, 921-8836 Nonoichi, Japan
*
Author to whom correspondence should be addressed.
Received: 1 March 2019 / Revised: 4 April 2019 / Accepted: 9 April 2019 / Published: 11 April 2019
(This article belongs to the Section Social Economics)
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PDF [401 KB, uploaded 11 April 2019]

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. View Full-Text
Keywords: microfinance; Ethiopia; social and financial performance; mission drift; SUR model; panel data regression microfinance; Ethiopia; social and financial performance; mission drift; SUR model; panel data regression
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Wassie, S.B.; Kusakari, H.; Sumimoto, M. Performance of Microfinance Institutions in Ethiopia: Integrating Financial and Social Metrics. Soc. Sci. 2019, 8, 117.

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