Factors Affecting The Performance Of Microfinance Institutions: The Case Of Ambo Town

Abstract

A microfinance institution is to promote small scale financial services for those who lack formal commercial bank access. The purpose of this study was to assess the factors affecting the performance of microfinance institutions in Ambo town. The research design was a descriptive and random sampling technique is used. The data were obtained through questionnaire and interview. A total of 388 questionnaires were distributed and only 353 were filled and returned by the respondents. Mean, standard deviation, and ANOVA as a statistical method was used to analyze and presents the structured items of the questionnaires quantitatively. The effect of institutional factors on the microfinance performance in Wasasa microfinance were observed to be (M=4.42 SD=.37), vision fund customers were agreed (M=4.1 SD=.77), Busa Gonofa and Eshet microfinance customers were agreed that institutional factors has affected the organizational performance (M=4.04 SD=.49) and (M=3.95 SD=.62) respectively. A one-way ANOVA revealed that there were significant differences in the effect of institutional factors on the microfinance performances across the four microfinances of the town with the F-value 12246.88, p < .001. The influence of customers factors on the microfinance performance in Wasasa microfinance were detected to be higher than other microfinances (M=4.43 SD=.28), the vision fund and Eshet microfinance customers were agreed that the customer factors of their institutions could affect the microfinance performance (M=4.13 SD=.28) and (M=4.12 SD=.42) respectively. A one-way ANOVA discovered that there were significant differences impact of cliental factors on the microfinance performances across the four microfinances of the town with the F-value 18642.45, p < .001. A one-way ANOVA discovered that there were significant differences impacts of the effect of the regulatory and legal framework factors on the microfinance performance across the four microfinances of the town with the F-value 9172.84, p < .001. A one-way ANOVA revealed that there were significant differences in the impact of Economic factors on the microfinance performances across the four microfinances of the town with the F-value 18246.881, p < .001 The present result allows me to conclude that institutional factors, cliental factors and regulatory and legal framework factors have a significant factor on the performance microfinance in Ambo town. Hence, the institutions needed assess themselves about their performances by research investigations.