Assessment Of Loan Repayment Performance Of Clients Of Microfinance Inistitutions: The Case Of Chelia Woreda, Gedo Town

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.