ASSESSING THE IMPACT OF NONPERFORMING LOANS ON MICROFINANCE INSTITUITIONS (CASE STUDY: - OROMIA CREDIT AND SAVING SHARE COMPANY (OCSSC), JIMMA WALQO BRANCH)

Abstract

Microfinance institutions are very important financial institutions which help on raising the economic development of any country. MFIs played a great role, in providing loan for different economic sectors. Moreover, it also involved in financing high residential and business construction project to individuals and state sectors. Thus, there was also short term, medium term and long-term loans for working capital and business men as well. So, this indicates the role of MFIs to the development of economy as a whole. The purpose of the study was to find out the major impact of nonperforming loan in Oromia credit and saving s.c. Since loans forms greater portion of the total asset in institution, these assets generate huge interest income for the institution and also determines the financial performance of the banks. Institutions play a critical role in an economy, therefore it is essential to identify problem that affect the institutions. This is because nonperforming loans can affect the ability of intuitions to play their role in the development of the economy. The researcher study specifically aimed to identify the major case of nonperforming loans and managing technique of the institution to decrease the effect of nonperforming loans. In order to achieve the objective, the study the researcher was gathered data using both primary and secondary source. The primary data were collected using questionnaire and interview while the secondary data were collected from loan procedure of the institution. The collected data were analyzed and interpreted by using tables and percentage.