Abstract:
Microfinance institutions in Ethiopia are playing an important role in poverty reduction
strategies initiated by the government of Ethiopia. The major objective of this study is to
assess the challenges which affect the loan repayment performance of Clients of
microfinance institutions operating in Oromia regional state west showa zone chelia woreda
Gedo town and identifying its prospects. The research was descriptive in type and
probabilities that are expert (purposive) that is systematic sampling techniques were
employed for this study. Employees and clients of MFIs are the major target groups of the
study. From the total of 40 targeted employees, 19-operational employees are included in the
sample. On the other hand, from the total of 8960 targeted clients, 200 have been taken as a
sample. Primary and secondary data were collected through well-organized questionnaire
for this study. In addition to this, the researcher conducted interview with managers of the
institutions. Accordingly, the researcher assessed the major challenges of loan repayment
performance of clients of microfinance institutions and their prospects. Finally based on the
analysis and the finding of the study, the researcher recommended that the lending
institutes needs to focus on monitoring loan utilization systems of borrowers and
technical support needs of the target borrowers through delivering better awareness
creation to organize the more viable borrowers, close supervision and follow-ups and
strengthening their internal and external weaknesses though better integration with key
partner stake holders. It is advisable for government to provide at least basic informal
education for those who cannot write and read to stay them competitive in business and be
productive in their jobs, and make awareness creation on family planning.
