Determinants Of Loan Settlement Performance For Microfinance Institutions Of Oromia Regional State Of Ethiopia

Abstract

Oromia Credit and Saving Share Company Microfinance Institute (OCSSCOs MFI) is indulged in developmental activities in Oromia Regional State, Ethiopia. OCSSCO mainly provides Loan services to rural and urban clients, landless individuals and smallholder farmers and disadvantaged people but competent to run Income Generating Activities. Poverty elimination and reducing unemployment are the key objectives of the Microfinance. This particular study has been conducted with an intention of analyzing the factors that impact microfinance Loan settlement performance, to evaluate the Loan rationing mechanism and also examining the impact of the Microfinance intervention borrowers’ livelihood. This study is mainly based on primary data gathered through structured questionnaires. The results indicate that age and gender of the borrowers, Loan size, Loan diversion, Loan supervision, and suitability of settlement period, multiple Loans and shocks are essential and considerable factors that enhance the Loan settlement performance of borrowers. Based on these result the institution is suggested to pay attention to the concerned factors and thus propose an efficient lending policy emphasizing on effective command, instruction and approval of suitable Loan size so that difficulty in loan defaults get decreased. Moreover, it should also put emphasis on quality as intensifying of its services by contributing to the enhancement of the settlement performance and also OCSSCO has to emulate profitable operations by designing and implementing a sound monetary management and excellent administrative governance to assure their better monetary performance as well as sustainability.