Risks that hinder growth and performance of microfinance institutions in Ethiopia: study in Oromia regional state, Ambo town

Daniel Tadesse Tulu

Abstract


Nowadays the international development agenda is dominated by the Millennium Development Goals with poverty eradication as a top ranking issue in the list of the goals, and microfinance is firmly linked to this goal. So, the study deals with identification of microfinance risks which helps in provision of proper a risk mitigation strategies which can result in good and healthy functioning of the institutions. The study assess the risks that microfinance institutions in Ethiopia particularly those operating in Ambo area come across while doing their business. The study is descriptive in nature. It uses both quantitative and qualitative techniques to come up with the risks. Sample of 42 respondents are taken from four microfinances in Ambo area. The result from the study revealed that microfinance institutions in Ambo area are affected by risks internal and external to the institutions which comprises strategic, financial and operational risks. Internally risks includes staffing risk, liquidity risk, customer management, risks due to weak administration and control, lack of technology management weak accounting systems, and too little fund risk and externally by competition, over indebtedness and credit risks affect microfinance performance.


Keywords


microfinance, risks, operational risks, financial risks, strategic risks, internal risks and external risks

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DOI: https://doi.org/10.11634/232907811705827

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