| Abstract: | The main objective of microfinance institution is to operate profitably in order to maintain its stability and improve growth and sustainability by supporting small and micro level enterprises to reduce unemployment rate in the country. However, Addis credit and saving institution‟s experience high levels of non-performing loan threatens viability and sustainability of the institution and hinders the achievement of its goals. This study was aimed at assessing the level of of non-performing loan growth rate and the related causes for the occurrence of NPL. As noted by Sharon (2007), loans have a vital contribution towards development of economy. However, its nonpayment also leads to incidence of huge loss on Microfinance institution in particular and country in general.
Hence, this study was conducted to assess non-performing loan in Addis credit and saving institution. To this end, the researcher has selected credit officers and management of the institution to conduct interview and collect data through structured questionnaire. This study used primary and secondary sources of data, which is the data from the period 2013-2018 in comparison with the national. This research applies descriptive research design that describes the cause of nonperforming loan and also possible challenges and corrective measures for the NPLs in the institution.
The finding of this study shows the increment of NPL rate in the institution from time to time and this is because of factors like types of loan in which the institution mainly focuses on, low level of segregation of duty, inefficient analysis of collateral and business plan of customers, lack of independency in credit provision process and appraisal. However, despite of the factors of the increase in the level of NPL, the institution also take different measures to minimize the level of NPL such as arranging training, applying different credit follow up techniques and awareness creation. |
