THE EFFECT OF SOCIAL PERFORMANCE ON FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS: EVIDENCE FROM ETHIOPIA

Abstract

This paper aims to identify the effect of social performance on financial performance in the Ethiopian Microfinance Institutions (MFIs). The study conducted using quantitative data from a sample of 20 MFIs to empirically analyze the effect of social performance on financial performance in the Ethiopian MFIs. To the analysis secondary data collected from the Association of Ethiopian Microfinance Institutions annual financial performance bulletin from 2009 to 2018. To the data analysis both descriptive and random effect panel data analysis are employed. The Ethiopian MFIs were achieving a significant growth in operational self-sufficiency, return on asset, asset value, outstanding loan and savings in that period. The econometric result show both positive and negative significant and insignificant effect of social performances on financial performances among Ethiopian MFIs. In number of borrowers and loan portfolio social performances have positive and significant effect on financial performance among Ethiopian MFIs. In loan amount social performance have negative and significant effect on financial performance among Ethiopian MFIs. Saving amount and percentage of women borrower have no significant influence on operational self-sufficiency and percentage of women borrowers has no significance influence on return on asset. Therefore, MFIs can achieve financial objective while serving low income people. By this fact MFIs should focuses on efficient utilization of asset and other resource so that to be financially sustainable while serving low income peoples.