THE DETERMINANT OF OPERATIONAL AND FINANCIAL SELF SUFFICIENCY AN EMPIRICAL EVIDENCE OF ETHIOPIA MICROFINANCE INSTITUTIONS

Abstract

Operational and financial self-sufficiency are tools to measure the self-sufficiency of MFI in Ethiopia. The main objective of this study was to identify the determinant of operational and financial self-sufficiency in Ethiopia. In order to achieve the research objectives, data was collected from a sample of nineteen MFI in Ethiopia over the period from 2013 to 2022. MFI internal and external factors of operational and financial variables were analyzed by using ordinary least square(OLS) multiple linear regression analysis in the balanced panel fixed effect regression model. The findings of the study help to MFI in their policy. The study also discovered that, number of active borrower, female borrower and age of MFI have positive and significant impact on operational self-sufficiency and debt to equity ratio and cost per borrower have negative and significant effect on operational self-sufficiency. Similarly the size of MFI, deposit mobilization and age of MFI have positive and significant effect on financial self-sufficiency and operational expense ratio has negative and significant effect on financial self-sufficiency however, Labor cost to total asset ratio and Average loan size per average borrower haves no statistically significant effect on the operational self-sufficiency and Cost per borrower, Labor cost to total asset ratio and inflation have not statically significant effect on financial self-sufficiency of MFI. Thus, the study suggests that MFI age and operational expense ratio have high impact on the MFI sustainability to compete with the other MFI therefore as possible reduce operational expense in the market.