ASSESSMENT ON FACTORS AFFECTING THE

DEVELOPMENT AND PERFORMANCE OF

MICROFINANCE INSTITUTION
(Case study in Oromia credit and saving share company,
Nekemte branch)

THE RESEARCH PAPER SUBMITTED TO ACCOUNTING &

FINANCE DEPARTMENT IN PARTIAL FULFILMENT FOR
REQUREMENT OF BA DEGREE IN ACCOUNTING.

PREPARED BY: KAFALE GETACHEW

ADVISOR: ESHETU Y (MBA)

JIMMA UNIVERSITY
BUSINESS AND ECONOMICS COLLEGE
DEPARTMENT OF ACCOUNTING

JUNE, 2013

JIMMA, ETHIOPIA

I
 ACKNOWLEDGEMENT

First I would like to express my sincere gratitude to Mr, Eshetu Y. for his
constructive great support, comments, suggestions, encouragement and
offering useful hints since the data of topic selection to submission of the
proposal paper.

Secondary, I would like to thanks Jimma university, college of business and

economics for providing chance to conduct this study.

Thirdly, I would like to thank, the department of accounting to provide

professional course other guidelines how to prepare the proposal paper.
Lastly, My friends those have given me ideal support is not forgotten.

I
 ABSTRACT

The study under three title assessment on factors effecting the development
and performance of MFI, in oromia credit and saving share company Nekemte
branch, examine to know factors that affect the organization.

The general objective of this study is assessing the main factors that affect
the organizational development and performance. There are also specific
objectives in the study that will be mentioned.

Both primary and secondary data is considered. Primary data is collected

through questionnaires and interview and secondary is through available
literature on the subject and published and un published materials.

The data rethread analyzed by using both quantitative and qualitative data
analysis particular description types of analysis which used tables.

The non probability sampling, specifically judgmental sampling or other

techniques used for the study.

Generally, based on the result findings, conclusion and recommendation is

forwarded by the researcher. The company is with majority young employees
that training is given to them by the company. The objective of the training is
motivating the employees.

To sum up, this study conducted to assess or investigate the main factor that
affect development and performance of MFI. In oromia credit and saving share
company at Nekemte branch, and it provide some alterative solution for
identified problem.

II
Contents TABLE OF CONTENT Page
ACKNOWLEDGEMENT.................................................................................I
ABSTRACT...................................................................................................II
ACRONOMY...................................................................................................................................V
CHAPTER ONE.....................................................................................1
INTRODUCTION...................................................................................1
1.1BACKGROUND OF THE STUDY.......................................................................................1
1.2 STATEMENT OF THE PROBLEM....................................................................................3
1.3 OBJECTIVE OF THE STUDY............................................................................................4
1.3.1 General objectives.........................................................................................................4
1.3.2 Specific Objectives.......................................................................................................4
1.4 SIGNIFICANCE OF THE STUDY......................................................................................5
1.5 SCOPE OF THE STUDY......................................................................................................5
CHAPTER TWO....................................................................................6
LETERITURE REVIEW..........................................................................6
2.1 DEFINITION OF MICRO FINANCE INSTITUTIONS....................................................6
2.2 DEVELOPMENT OF MFI....................................................................................................7
2.3 DVELOPMENT OF MICRO FINANCE INSTITUTION (MFIs) IN ETHIOPIA...........8
2.4 FEATURE OF MICRO FINANCE INSTITUTION............................................................9
2.5 ROLE OF MFIs IN ECONOMIC DEVELOPMENT........................................................9
2.6 CRDEIT PROVISION............................................................................................................9
2.7 CREDIT REPAYMENT.......................................................................................................10
2.8 FACTORS OF CREDIT......................................................................................................10
2.8.1 Character......................................................................................................................10
2.8.2 Capacity.........................................................................................................................10
2.8.3 Capital............................................................................................................................10
2.8.4 Collateral.......................................................................................................................10
2.8.5 Challenges Of Micro Finance Institution.............................................................11
CHAPTER THREE...............................................................................12
METHODOLOGY.................................................................................12
3.1 SOURCE OF DATA.............................................................................................................12
3.2 METHOD OF DATA COLLECTION................................................................................12
3.3 METHODS OF SAMPLING...............................................................................................13
3.4 METHODS OF DATA ANALYSIS....................................................................................13
CHAPTER FOUR.................................................................................14

III
DATA ANALYSIS AND INTERPRETATION............................................14
4.1. AGE DISTRIBUTION OF EMPLOYEES...................................................................14
4.2 SEX OF EMPLOYEES....................................................................................................15
4.3. MARITAL STATUS OF THE EMPLOYEES.................................................................15
4.4 EDUCATIONAL STATUS OF THE EMPLOYEES....................................................16
4.5 FACTOR THAT AFFECT THE PERFORMANCE AND DEVELOPMENT OF
MICRO-FINANCE INSTITUTIONS (MFIS)........................................................................17
4.6 TYPES OF SERVICES PROVIDED BY MICRO- FINANCE INSTITUTION
(OROMIA CREDIT AND SAVING SHARE COMPANY, NEKEMTE BRANCH)............18
4.7. AIM OF THE SERVICES..............................................................................................18
4.8 TYPES OF PROBLEM IN THE COMPANY................................................................19
4.9 AIM OF TRAINING FOR THE STAFF MEMBERS..................................................20
4.10. AIM OF THE SERVICES OF THE COMPANY.....................................................21
4.11 NO OF PEOPLE (EMPLOYEES) TRAINING INDIFFERENT TECHNICAL AND
VOCATIONAL FIELDS BY MFIS. (OCSSC UP TO (2007-2009 G.C)........................22
CHAPTER FIVE..................................................................................23
SUMMARY, CONCLUSION AND RECOMMENDATIONS..........................23
5.1 SUMMARY OF FINDINGS................................................................................................23
5.2 CONCLUSSION...................................................................................................................24
REFERENCE...........................................................................................................................27
APPENDIXES...........................................................................................................................28

IV
ACRONOMY
MFIS= Micro Finance Institution

OCSSC= Oromia Credit and Saving Share company

NGO= None Governmental Organization

NBE= National Bank of Ethiopia

V
 CHAPTER ONE

INTRODUCTION

1.1BACKGROUND OF THE STUDY

Micro finance institution are involve in the provision of financial services,

some MFI also provide social intermediation services including help in group
promotion and the development of self confidence financial life and other
services. So, micro finance is one of the most important areas for a social
change economy, regional development, poverty alleviation effects enabling
measures that increase the capacity of the active poor people to engage in
gain full developing countries, Dr. Solomon A (1996). In order to address the
state of poverty and rely on low income and unemployment rate in
developing countries, social movement on the form of micro finance has
their members. However, micro finance at their early stage has faced
different economic and legal barriers in their operation and development.
The main constraint expertise access to appropriate technology. (Dr Teferi
(2000). The concept of MFI, has be started in Bangladesh which the German
bank was established as a research project or rural economic development
program to the poor under the Chittagong university in 1976. The central
mission was render financial service to active poor people especially women.
Mean while, even in modern bank of Ethiopia old phenomena which
originated in 1905 the finance factor of Ethiopia has not well developed. It is
still in fancy. Since micro finance credit and saving motivation in Ethiopia
are performed by NGOs, governmental departments proclamation number
40/1996 aimed to provide for the licensing supervision of the business of
micro finance clearly indicates micro finance activity should full fill the
following:
 Obtain license form NBE
 Formed as company governed by commenced
 Deposit minimum capital reserve in NBE

1
Generally, Oromia credit and saving share company was established late
from the year above and opened its branch on different towns. Nekemte is
one of the focus the organization opened its branch. The objective of the
study is to investigate or identify factor that affect the performance & dev’t of
the company it reevaluate how the problem decreased & recommend based
on the study, while the research is conducted.

2
1.2 STATEMENT OF THE PROBLEM

In today business world, there are so many factors affecting development

and performance of business organization. Identification of this factors has a
great significance for the successful operation of the organization. Because,
these factors are means to measure and enhance organization’s strength, to
minimize weakness and realize the changing business environment.

In order to avoid poverty, low income and food insecurity, micro finance
should be able to provide sustainable economic development and
performance through the country. This means MFIs is the best way to avoid
poverty, low income and food in security, in developing countries including
Ethiopia by giving financial services to the large number of poor active
people. Access financial services such as loans , saving services and
insurance. This enable people to increase income and smooth consumption
flows, expanding their asset base and increase their ability to respond to
financial and economic crises. However MFI has faced various problems that
affect their activities. These problems will be awareness of the society in
using micro finance services, lack of well trained workers and fear of the
future repay the loan on due date.

The research analysis the development and performance of micro finance

institution. Oromia credit & saving share company, at Nekmte branch.
Regarding to this the study has answer the following basic questions.

 What are the factor that affecting the development and performance of
MFIs (oromia credit and saving share company, Nekemte branch)?
 What are the cause for these factors?
 Is the society has enough awareness in using the services of MFIs
Oromia credit and saving share company, at Nekemte branch?
 What are the solutions that MFI, Oromia credit & saving share
company, at Nekmte branch use to avoid all above problem?

3
1.3 OBJECTIVE OF THE STUDY

To identify factor affecting the development and performance of MFI, oromia

credit and saving share company, at Nekemte branch, the researcher has
given some general and specific objectives.

1.3.1 General objectives

The general objectives of this study is:- to identify or assess factors that
affecting the development and performance of MFI, Oromia credit and saving
share company, Nekemte branch. To investigate different factors that affect
the development and performance of the organization.

1.3.2 Specific Objectives

In addition, the specific objectives of the study are:-

 To analyze the factors that affecting the organization

 To determine causes and consequences of the factors
 To study the awareness of the society in using services of the
organization.
 To examine the contribution of the service for organization’s dev’t and
performance
 To provide suggestion for the problems.

4
1.4 SIGNIFICANCE OF THE STUDY

The study help to know about the importance of micro fiancé to know, why
and how it reduces the productivity. In general it helps to know the
problems affecting the development and performance of micro finance
institution Oromia credit and saving share company in Nekemte branch and
also the importance of this study is to:

 Identifying factors that affecting the development performance of the

organization
 Create awareness for manager about the changing business
environment.
 Suggest or propose solution for the identified problem based on the
gathered information.
 Indicate available alternative in the organization and
 Facilitate the ground for the coming research as reference

1.5 SCOPE OF THE STUDY

The scope of this study will be concerned with internal auditing practice in
commercial bank of Ethiopia Ambo branch. Specifically the area coverage of
the study will be emphasized on the role of internal audits and its
effectiveness in the achievement of organizational objectives.

This study will conducted in unique town of eastern wellega Nekemte town.
This town is not far from the center, so research, critically investigate factors
affecting development of performance of MFIs Oromia credit and saving
share company, in Nekemte to reach on remarkable result from the study,
by attempting to answer the stated questions on statement of the problem.
The researcher data will covered from establishments of the company to
2013 (some specific data-2013).

5
 CHAPTER TWO
LETERITURE REVIEW

2.1 DEFINITION OF MICRO FINANCE INSTITUTIONS

Micro finance institution has involved as an economic development
approach in tended to benefit low- income society especially women in
urban through rural. The term refers to the provision of financial services to
low income clients including the self employed.(Saunders & cornet 2004).
If also financial infirmaries whose primary faction in to infer midrate
between lenders and borrowers in economy.
Financial services generally comprises saving and credit. However, some
micro finance organizations also provide insurance and payment services. In
addition to financial intermediation, any MFIs provide insurance& payment
services. Such as group formation, development of self confidence and
training in financial literacy and management capabilities among members
of group. Both financial intermediation and social intermediation MFIs
involve the followings:
 Small loans, typically for working capital
 Informal appraisal of bowers and investments
 Collateral substitutes such group guarantees or compulsory saving
 Access to repeated and larger loans, based on repayment
performance.
 Stream loan disbursement and monitoring
 Secure saving products.

Any institution standing between the ultimate provider of funds and the
ultimate user of fund is financial intermediation. At the same time it is
important to remember that many of the services offered by financial
institution are not intermediation activities. Financial advisor services
provided by many financial institution fund management services and
examples of non intermediately services. Also insurance a gents are not
principles who deal in their own name (Goucues, 2002)

6
2.2 DEVELOPMENT OF MFI
Low level of income and productively in poor countries is often attributed to
lack of access to institutional credit. Capital markers do not serve low
income households and local money undress often changes exorbitant
interest rate, one of the first innovator financial institutions. That often
mooted to reach poor people was the Gramer bank of Bangladesh.

If was established in 1976 as a small action research project to provide

credit to landless and other asset less households using to the principles of
peer group monitoring to reduce lending risk (ACMFI). As in most developing
countries, the bulk of the poor in Ethiopia live in rural area. Urban poverty
has been also on the rise or the past 50 years in the country. In attempts to
pull households form poverty, if is believed that provision of credit
particularly to poor urban households could play an important role. If such
house holds have capital to start or expand small business they can credos
additional self, employment almost immediately and experience vital
increase income. (Solomon, 1996) and (Teferi, 2000)

According to Solomon and Taferi formed financial, the bulk of the population
bank branches are limited urban poor thus, micro financial programs and
institutions consequently the poor were forced to turn to traditional of
money lender who loan at higher interest rates the payment of which restrict
the poor’s compare a five advantage and keep them under the spell of
perpetual poverty (Micro finance development review)

An attractive and innovative approach preaches provides credit to the poor

has been designed and successfully tries in many developing countries. the
new approach, the best example of which is they Germen Bank of
Bangladeshi focused its credit schemes on poor house held’s especially poor
women and offers creodont based group collateral.

This is introduced in Ethiopia 1993 under the market towns development

program. The main targets of the scheme are the bottom poor living
inurbane centers that are engaged in or with to purge micro activities
(Solomon, 1996)

7
2.3 DVELOPMENT OF MICRO FINANCE INSTITUTION (MFIs) IN
ETHIOPIA
The level of development of the MFIs in Ethiopia shaves substantial
valuation from MFI for another deposit mobilization, and staffing. In general
all MFIs have not covered the whole regions of the country in their financial
services out reach.

This could be evidenced by the number of clients served in the subset or i.e
only about 800,000 to 1000,000 people until today. The major cause are
drought limited financial and skilled human resources in adequate in
futures and lack if public awareness today frequently of MFIs, prolonged
drought has reduced the production of major food crops, resulting in acute
and recurrent shortage of food. This resulted in weak performance if MFIs
by reducing loan collection limiting their outreach and leading to
determination of disbursements. These problems threaded the sustainability
of the institutions.

The primary objectives of majority of MFIs is prevision finance services to th

rural and urban poor who cannot access conventional banking services
mainly because of lack of physical collateral. The major source of financial
for MFIs, including those owned by regional government or lending activities
and operational expense remained to be donations. The need to reach the
rural and urban poor has necessitated non collateral based lending system
whereby peer monitoring and pressure is used for screening credit worthy
applications to ensure repayment it loads.

Oromia credit and saving share company (OCSSC) established as per the
commercial code of Ethiopia and proclamation number 406 to provide
financial and other related services within the boundaries of Oromia
administration. If was established and registered of micro finance institution
at the natural bank of Ethiopia and burial of trade and industry of the city
administration on January 2000 with a paid up capital of birr 517,000,00.
Before it adapted the name Oromia credit and saving share company
(OCSSC) and become licensed by national bank of Ethiopia (NBE), if was
called small scale innovation and job creation institution founded in 1996
for the same purpose.

8
2.4 FEATURE OF MICRO FINANCE INSTITUTION
There are some district features of micro finance institution (MFI) in relation
to other financial intermediaries. These are:-

 Addressing the credit needs of the poor especially rural poor engaging
farming in small scale production & services activities.
 Rendering managerial marketing technical and administrative advice
to borrower.
 MFIs loans are small compare to loans provided by conventional
banks.

2.5 ROLE OF MFIs IN ECONOMIC DEVELOPMENT

The orthodox explanation of the need for credit on the part of small scale
entrepreneur and peas out farmer’s hinges on two factors probity and the
exploitative native nature of informal credit. First, the majority of people in
developing countries considered to be very poor and unable simulated
substantial savings, their need external finance to break away from the
vicious credit of poverty. An external “push” is therefore necessity for the
economic fiancé is considered to be much higher and uncurious compared
to those in formal sector. Hence, there is anteed to rescue small scale
borrowers form the clothes of rapacious benefits in the formal sector by
providing formal finance at responsible rates and charge (Hyuhaet al, 1993)

2.6 CRDEIT PROVISION

Credit is borrowed funds which specified terms for repayment when there
are insufficient accumulated saving to finance a business and when return
on a borrowed funds exceeds the interest rate charged business activity
until sufficient the debt exists(Nigussieff, micro 1996).

Loans are generally made for productive purpose that is to generate revenue
with in a business. Some MFIs also make loans for consumption, housing or
special occasions. Most not include financial sustainability ensuring that
the services offered meet the demands of clients that operations are
sufficient to cover cost and that clients are motivated for repay loads. MFIs
can be sustainable providing they have enough funds to confine operating in
the long time. These funds can be solely operational revenue.
9
2.7 CREDIT REPAYMENT
All credit (except housing loans) repayable uniformly in fifty equal weekly
installments, at two percents of loan amount per week, respective of loans
amount or nature of activity. Therefore, the interest is collided in next two
weekly installments.

2.8 FACTORS OF CREDIT

The article tries to annotate the demands of credit which can held away,
during command economy. If may also us to keep up with regions disciple of
credit system on the market economy because credit is the banking
profession with its value system and goals and in the total environment as
the apex in the frame work of banking activity.

 The following are the factor that affects the credit activity:-

2.8.1 Character
Character is what you have in the bank is ascetical criteria on our
consideration, because, the bank lend money hadn’t balance sheet. Chiefly
applied of group of traits that how social significance & moral quality
maintained in the specific activity.

2.8.2 Capacity
In weighting credit, risk is every significant to satisfies do care oneself with
the capacity, capability and competency of the management of the credit
regulating entity which capacity of applicants income is about present debt
commitments to be determined as well as the applicants expenditure
pattern.

2.8.3 Capital
Capital is a property risk. If measure the borrower’s financial soundness or
its financial strength that nears the applicants must have enough money
his/her business to turn around on.

2.8.4 Collateral
Collateral is anything of value pleaded as additional security as property or
any of the pleaded deposit secures the performance of contract or dosage of
an purgation is fulfilled.

10
2.8.5 Challenges Of Micro Finance Institution

Micro finance institutions (MFIs) whether they are reliant on donation or

equity investment Sims at providing financial services for the economically
active peers. A business under taken by the peers has dual characteristics
that are mutually center connected and also seems contradictory when one
sees it is at a place on the one hand financial services that are targeting
poverty alleviation and enhancing to the productizing of the poor should be
able to mange to ensure poverty elevation & enhancing producing
productivity endeavors client sustainability.

Any MFIs, can only sustain as long as it remains institutionally and

financially make it risible as the borrowers. It cafes are worthy its
assistance. Moreover, in order to ensure institutional sustainability ever
MFIs should as much as possible worth to minimize the challenges to its
sustainability the challenges in achieving sustainability are multi
dimensional

- Governance related challenges

- Fund related challenges
- Market related challenges
- System related challenges of the FMIs.

11
 CHAPTER THREE

METHODOLOGY

The study was conducted to assess factors affecting development and

performance of micro finance institution in Oromia credit and saving share
company at Nekemte branch. The researcher utilize different research
methods materials in taking in to consideration the variables. In addition,
the researcher access and analyze the main factors that affect the
development and performance of the organization. In addition he given
recommendation and certain amount of opinion based on the information
gathered that used for the organization.

3.1 SOURCE OF DATA

The researcher consider both primary and secondary source of data.

Primary source of data:- every necessary information for the study collected
by this primary data either, questioner, interview, or observation and etc.
/reliability of the source./

Secondary data source:- all helpful materials related to the study is used.
Such as review of available literature and written material in the
company./due to availability (for additional information)

3.2 METHOD OF DATA COLLECTION

Primary data is assumed to be collected by either of methods of primary
data collection like questionnaires, interview and observation but, the
researcher will focus on questionnaires method ineffective & efficiency
manner in order to minimize cost & wastage. In addition to these, the
following factors will enforce the researcher to use questioner method of
data collection.

- It give respondent enough time to response or give opinion to

questions.
- It help to set real information and to the point

12
Secondary data:- used as supplementary or additional data collection
method. By considering comprehensive conceptual premedical foundation of
the study at hand. Exclusive review of available littered on the subject and
both published and unpublished materials available in the company is read
and have seen in well manner.

3.3 METHODS OF SAMPLING

The data would collected from employees of the organization, and other
concerned body including manger of the company. In order to collect the
desired data at a desired cost from these groups the sampling method is
used. Non probability sampling, specifically judgmental sampling technique
would applied because, in this case the researcher has full freedom in
choosing his sample according to his wished & desires. And the researcher
is somewhat familiar with the organization. There are 19 employees in the
organization, hence, 5 females and 14 males.

The researcher will take the sample size of between (80%-85%) employees
form total number of employees available in the company, based on their
experience and awareness judgmentally.

3.4 METHODS OF DATA ANALYSIS

Processing of data is executed after collecting the necessary data. The
collected data is edited and then classified in order to resettable for the
purpose of processing to take in to position. The processed data will
analyzed using descriptive staffing both data analysis methods (quantitative
and qualitative data analysis method are used. In addition the data collected
through questionnaires, would analyzed by using table or schedule. Also
descriptive analysis used in order to avoid or minimize complexity and
ambiguity results of the research.

13
 CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

This chapter present the information gathered through both primary data
source i.e. questioner and secondary data i.e. from documented materials to
identify and investigate the inherent problems of the micro-finance
institution, Nekemte branch, moreover, the data rethread are believed to
help the researcher on finding out the main factors that affect the
performance and development of the company.

Further more for appropriate analysis and interpretation to present the

précis value of the data to the readers. Both questioner items and
information rethread through secondary data are tabulated and presented.

All the analysis are concerned in investigating and identifying factors the
performance and development of micro finance institution. The creditable
information is obtained from the employees and manager of the company.

4.1. AGE DISTRIBUTION OF EMPLOYEES

Table 4.1.1: age of employees of the company

Age No of respondent Percentage (%)

20-30 6 40.00
31-50 5 33.33
>50 4 26.67
Total 15 100.00
Source: primary data

The above table (Table4.1.1) show that 6 (40%) of the employees of the
Oromia credit and saving share company, at Nekemte branch come under
the age group of 20-30 years, 5(33.33%) of the employees are between 31-50
year and 4(26-67%) of the employees are above 50 years.

From the above result one can conclude that the majority of the company’s
employees are young. Thus the OCCSSC has good proportion of young and
experienced employees.

4.2 SEX OF EMPLOYEES

Sex identification of the employees important to see or understand the male
and female participation in the company’s services activity. The employee’s
14
responses are summarized by the table below. This information is taken
from total population based on the sample (table4.1.2).

Table 4.2.1: sex of employees in Oromia credit and saving share

company, at Nekemte branch.

Sex No of responded Percentage (%)

Male 12 80.00
Female 3 20.00
Total 15 100.00
Source: Primary data

The above table (table 4.1.2) shows that from the total respondent of 15
employees of the company, 12(80%) of they are males and the rates 3(20%)
are females.

From this research, the researcher can conclude that the male employees of
the company count a great number having more than one third of the total
employees of the company and it show that the female participation is low.

4.3. MARITAL STATUS OF THE EMPLOYEES

Table 4.3.1 Sample respondents by marital status of the company

Marital status No of responded Percentage (%)

Married 10 66.68
Divorced 1 06.66
Un married 3 20.00
Widowed 1 06.66
Total 15 100.00
Source: Primary data

From the above table (table 4.1.3), with respect to marital status of the
sample respondents, 10(66.68%) are married where as 3(20%0 are un
married and divorced and widowed are equal in number and percentage,
that is 1(6.66%0 each.

From this result, the researcher can conclude that the married employees of
the company accounts very great number than any of un married, divorced
and windowed employees.

15
4.4 EDUCATIONAL STATUS OF THE EMPLOYEES
Identification of the educational level of the employees is very essential and
vital for the success of full operation of the company as well as for the other
business organization, to give quality services. The educational level of
employees in the Oromia credit and saving share company at Nekemte
Branch are shown in the table below (Table 4.1.4).

Table 4.4.1: Educational status of the Employees in the company

Educational level No of responded Percentage (%)

College diploma 10 66.67
BA degree 3 20.00
10+2 complete 1 6.67
10 complete 1 6.67
Total 15 100.00
Source: Primary data

The above table shows that, most of the employees 10(66.67%) are college
diploma holders, 3(20%) of the respondents have the first degree in different
fields, 1(6.67%) of the employees has 10+2 Diploma from technique and
vocational training institute, and other 1(6.67%) of the employees have
certificated and serve as agued for that company.

The above result is clear that the educational status of the employees are
poor and implies that, the management body of the company does not pay
attention for educational levels of the employee. Since employees
competitiveness is very important of successful operation and existence of
any organization, paying attention to employee’s educational level and
competitiveness is cervical thing.

4.5 FACTOR THAT AFFECT THE PERFORMANCE AND DEVELOPMENT

OF MICRO-FINANCE INSTITUTIONS (MFIS)
According to the respondent’s information given, micro-finance the Oromia
credit and saving share company, Nekemte Branch’s development and
performance affected by so many factors.

16
 Table 4.5.1 Factors that affect the development and performance of the
Oromia credit and saving share company, at Nekemte Branch.

Major factors that affect the No of responded Percentage (%)

development and performance of the
company
Lack of proper use of service given by the 9 60
company
Lack of Resource 3 20
Political factors 1 6.66
Climatic factors 2 13.33
Total 15 100.00
Source: Primary data

The above table shows that most of the respondents 9(60%) pointed out that
the major factor that affect the development and performance of micro
finance institution is lack of awareness of using the service given by the
company. On the other hand, some 3(20%) of the respondents believed that
the major factor that affect the development and performance of MFIS, is
lack of resources. The others 2(13.33%) and 1(6.66%) of respondents
responded respectively that the major factor that affect the development and
performance of micro-finance institution are political and climatic factors.

The above result implies that from different factors that affect the
performance and development of MFIs of Oromia credit and saving share
company. The major one is lack of awareness of wing the service. If is
advisable to the company to make proper decision to reduce (protect) those
factor’s by giving training for the society.

4.6 TYPES OF SERVICES PROVIDED BY MICRO- FINANCE INSTITUTION

(OROMIA CREDIT AND SAVING SHARE COMPANY, NEKEMTE
BRANCH).
As respondents give information about current services provided are listed
in the table below.

Table: 4.6.1 Services Currently Provided by the Company.

Types of services currently No of respondent Percentage (%)

provided by the company
17
 Loan 8 55.33
Saving services 5 33.33
Insurances 2 13.33
Total 15 1000
Source: primary data

According to the above table what does this imply?(Table 4.1.6) 8(53.33%) o
for the respondents replied that currently they delivered only saving
services. On the other hand, 5(33.33%) of the respondents notified that,
currently they are wing only saving services. The remaining 2(13.33%0 of
respondents are presently using only the insurance service. From these
results, the researcher concludes that the share company provides services
such as loan, saving services and insurance. The major service that
provided by the company is loan services. Next to their the share company
provided saving services and insurance respectively.

4.7. AIM OF THE SERVICES

Table 4.7.1: Purpose of the Service of the Company for This the
Researcher Got Responses Only From Respondents.

If your answer to Q No 6 is Yes is there No of responded Percentage (%)

any problem associated with it?
Yes 13 90
No - -
Total 10 66.67
Source: primary data

The above table shows that almost all of the respondents whose response for
question on table 4.1.6 is loan 13(90%) said that the loan are extremely
dominated in the societies.

4.8 TYPES OF PROBLEM IN THE COMPANY

Table 4.8.1; Types of Problems that are Faced by the Company. For
this the Researcher for responds only from 13 respondents..

If your answer to Q No 7 is “Yes” what No of responded Percentage (%)

Types of Problems you ever Faced
Lack of awareness of the people on taking 8 62
loan
18
Non- repayment of borrowed money 3 23.1
Lack enough payment for the workers 2 15
Total 13 100
Source: primary data

The above table shows that more than half of the respondents 8(62%) said
that the problem is awareness of people on taking loan and the remaining
3(23%) respondent that the people faced with the fear of nonpayment of
borrowed money, in addition 2(15%0 of the respondents are respond as the
problem faced is lack of enough payment to the workers of the organization.

As the manager of the company inform me the organization was established

in 1997 G.C as Oromia credit saving share company. As wellega Branch.
The role of micro-finance institutions towards poverty alleviation in the two
is high. By encouraging or motivating the societies to credited (minimize)
and facilitate the conditions in different ways (such as informing the
disadvantages of poverty, make them as a unity and give them credit (loan)
and as well as delivering them saving services.

4.9 AIM OF TRAINING FOR THE STAFF MEMBERS

Table 4.9.1: The Objective of Training Given by the Share Company in
Nekemte Branch..

Does the institution given training for No of responded Percentage (%)

the staff members?
Yes 13 86.67
No 2 13.33
Total 15 100.00
Source: primary data

From the above table one can understand that more than half of
respondents 13(86.67%) replied that the institution gives training for staff
members where as 2(13.33%) of the respondents replied that no training is
given.

19
If your answer to question raised on No of responded Percentage (%)
table 4.1.9 is “Yes” what was the
objectives of the training?
To gives skill full and improve the work 5 38.46
performance of the employee
To increase the salary of the employees 3 23.08
after completing the trading program.
To increase productivity 3 23.08
To motivate employee toward their work 2 15.38
Total 13 100.00
Source: primary data

Hence, the table above shows that objective of the training provided by the
company as responded by 5(38.46%) is to give skill full and 3(23.08%)
improve the work performance of the training given by the company is to
increase the salary of employees after completing the training program and
the same number of respondents replied that the objective of the training is
to increase productivity. The remaining 2(15.38%) replied that the aim of the
training provided by the company is to motivate the employees towards their
work.

4.10. AIM OF THE SERVICES OF THE COMPANY

Table 4.10.1: Aim of the Service given by the Company

Did your institution teach and create No of responded Percentage (%)

awareness in the societies about the
services to the company
Yes 15 100.00
No - -
Total 15 100.00
Source: primary data

As predicated from above table all of the respondents 15(100%) said

institution share their experience to the societies. From the respondents
point of view, the general idea of Oromia credit and saving share company,
Nekemte branch is have good approach towards the societies in working the
improve the living standards of the societies and alleviating poverty by

20
 delivering proper services concerning to giving’s loan, saving and insurance
to the society’s members.

As the researcher responded from the mangers of the company, the

business is starting with the intention of serve the societies by providing
finance and developing saving culture toward the member of society. The
customer (clients) of the organization visit regularly for different issues, and
use the service given by the organization in proper manner.

The major source of income for the company is loan from the clients and the
major expenditure is tax, pension, salary paid for the employees, and other
miss Ileneus expenses.

4.11 NO OF PEOPLE (EMPLOYEES) TRAINING INDIFFERENT

TECHNICAL AND VOCATIONAL FIELDS BY MFIS. (OCSSC
UP TO (2007-2009 G.C)
Table 4.11.1 Types of employees by years

Type if employees
Years Male Y Female X Total
2007 9 75 3 25 12
2008 11 84.6 2 14.4 13
2009 14 82.4 3 17.6 17
Total 34 80.9 8 9.1 42
Source: Secondary data

As the above table 4.1.11 shows that male employees engaged in the MFIs
(ocssc) Nekemte branch is higher than the number of female employees for
these three successive years. This accounts for 75%, 84.4% and 82.4% in
2007, 2008, 2009 respectively.

21
The total number of employees engaged in Nekemte town MFIs. As the
town’s MFIs bureaus census shown during these successively.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 SUMMARY OF FINDINGS

There research has summarized the major finding of the study as follows:

 The majority of the company employees 6(40%) are young who belongs to
20-30 years thus the company has a good proportion of young and
experienced employees, and the number of male 12(80%), greater than
3(20%) of males. Most of the company employees 10(66.68%) of them
have diploma (3(20%) BA degree 1(6.67%) 10+2, and other 1(6.67%) 10
complete. With respect to marital status of the employees 10(66.68%) are
married, 3(20%) are percentage that is 1(6.66%) each.

22
 9(60%) of employees said there is lack of awareness of using the service
given by the company, 3(20%0- respondents are said it is lack of
recourses and the other 2(13.33%) and 1(6.66%0 of respondents
resounded respectively that the major factor that affect the development
and performance of Oromia credit and saving share company, Nekemte
branch are political and climatic factors. 8(53.33%) of the employees
which currently they delivered loan service, 5(33.33%) of employees
which are using only insurance services.
 All of Oromia credit and saving share company, Nekemte branch
respondents (100%) are said that the problems exist associated with the
loan in the societies. Most of the respondents 8(62.5%) said that the
problem is awareness of people on taking loan and the remaining
3(23.50%) respondent that the people faced the problem of non-
repayment of borrowed money.
 The objective of the training provided by the company is to motivate the
employees. The company have good approach towards the societies in
working to improve the living standard of society by alleviating poverty
and delivering different service, also by solving problem.

5.2 CONCLUSSION

23
All the data analysis and the detailed discussions made in the preceding
parts of this study area are means to lead the researcher to possible
conclusion and recommendation, so that, facts and solutions are aimed to
be stated explicitly for measures to be taken up on. Once those, factors that
affect the development and performance of the micro institution Oromia
credit and saving share company, Nekemt branch, the branch which have
positive relation to the company’s profitability, while at the same time
working to develop greater use of those factors which are the company’s
strength but not emphasized. This research was seen as one effort to
understand the current situation of the company problems relating services
for customers and lack if well trained, skilled and professional employees.

There are many problem that affect the company, which the company has
yet to remedy. They are as follows:-

1. Lack of awareness about using the services given by the company

2. Fear of failure or repayment of the loan on due date.
3. Lack of provision of incentive, bonus and reward to both employees
and clients from the management point of view as a means of
encouragement.
4. Low level of female participation

The Oromia credit and saving share company at Nekemte branch satisfy the
client by providing different services as they want based on its rule and
regulation. It also give advice to clients on how the run their business and
develop culture of saving. In some extent the company reduce food
insecurity and poverty by playing its great role in doing so.

5.3 RECOMMENDATIONS
24
In order to avoid problem relating to the employees efficiency and time
management habit in rendering the company’s services within a short period
of time and ti improve the customer services techniques of employees, the
company have to upgrade the level of employees competencies with the
liberalization of the economy and emergency of other new sector
microfinance, the acquisition and development of new and improved skills
have became prerequisites for their survival and growth. Given the
increasing divesting and sophistication of business, it may be necessary for
the company to go the market for recruiting man power with special skill
from time to time. If would be also merit with accelerated promotional
opportunities, this in turn and improve the quality services.

- With a view to overcome difficulties in the company some measure are

suggested.
1. Dealing with and developing the company’s habit and up grading the
awareness of the employees and the society as whole.
2. The period of repayment should be determined and strengthen repaying
capacity. Knowing due date, the clients adjust their investment &
source finance to pay back.
3. The company might consider training for employee’s in order to increase
the effectiveness of ever process specially regular training to increase
performance of the employees, productivity and achieve objectives. b/c
training add knowledge and new information on what the employees
have.
4. Encouraging female participation is better to the balanced and proper
services.
5. Government has a major role in rural development effort by
implementing proper policies in micro insinuations, providing an
enabling environment, in restructure, institutions service and also
difficult situation like, inflation, market fluctuation. So making close
relation with gov’t is advisable to the company.
6. Detail evaluation the client’s performance before determine loan
amount.
7. The efficiency of micro financial institutions should be improved
through better skilled man power planning. A sound system of man
25
 power resources management should be embrace recruitment,
trainings, placement accountability and incentive.
8. Provide reward and bonus for good performer employees and clients to
enhance completion among them that leads increment of productivities
performance.

REFERENCE

26
 Federal Negarit Gazeta (1996) Licensing & supervision of micro

finance institutions (proclamation No 40(2000).

 Solomon A, (1996) “micro credit and poverty alleviation in Ethiopia

 Teferi (2000) “ Rural development and anti poverty program”

APPENDIXES
JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING

27
Questionnaire for employees of MFIs (case study at Oromia credit
and saving share company in Nekemte branch)

The objective this study is for the partial fulfillment of bachelor of

art in accounting. The researcher will fund out the factors
affecting the development and performance of micro finance
institution and to world possible suggestion for improvement.

Thanks in advance !!

To show your choice use “√” in box provided. No need to write

your name.

Part 1 Interview questionnaire

1. General back ground

1.1 Age: 18-29 30-50 above 50
1.2 Gender Male Female

2. Educational status:- Below 12 Diploma

Degree Above degree

3. Marriage status:- Married Divorced

Un married widowed

Part II Questioner about the organization

4. How do you relate the role of your institution towards over

ulceration in the turn & rural financial problem?

Very good Good if other (specify)___________

5. What are the major factors that affect the development and
performance of institution (MFIs)

Lack of resource climate factors

Political factors lack of awareness

6. What types of service your institution can give to the societies/

Loan Saving service insurance

Other (specify)____________________________________

28
7. If your answer the question No 6 is loan, is there any problem
related with if (loan) Yes No

8. If your answer to the question No 7 above is Yes, what type of

problem as you think?

Awareness of people on taking loan

Mon-repaying of borrowed money

Other (specify)_______________________________________________

9. Did the instruction give training for the staff workers?

Yes No

10. If your answer for question No9is Yes, what is the objective of
the institution to give training?

To give skill and improve the work performance of the

employees

To motivate the employees

To increase productivity

Other (please specify)_______________________________________

11.What is your profession in the institution?___________________

____________________________________________________________

____________________________________________________________

12.Does your institution teach and aware to society about the

services of MFIs? Yes No

23.What is your general idea (subjective recommendation) about

MFIs in Nekmete branch?

APPENDIXES
JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING
29
 Questionnaire Management of MFIs

Assessment of factors affecting the development and performance

of MFI (case study at Oromia credit and saving share company in
Nekemte branch)

This questionnaire is despond to collect information for assessing

fact affecting performance of MFI ion Nekmte branch form
management of the micro finance. The research promises you
that all data you provide will kept con-identical and used for
academic purpose only.

The research will kindly reused you to complete is questionnaire

genuinely in advanced.

Thanks in advance !!

To show your choice use “√” in box provided. No need to write

your name.

Part 1 Interview questionnaire

2. General back ground

2.1 Age: 20-30 31-50 above 50
1.2 Gender Male Female

2. Educational status:- Below 12 Diploma

Degree Above degree

3. Marriage status:- Married Divorced

Un married widowed

Part II questioners about the organization

4. Types business you do?

Merchandise Service
Small scale Industry
5. When did you start the business? Year____________________

30
6. How do you rate your business (institution) towards the
poverty allegation in the town?
High Low Medium
7. What was your intention for starting the business?
Desire to work for one self
To accumulate wealth
Other (please specify)______________________________________
8. Do customers (clients) visit you regularly? Yes No
9. If your answer for question No 8 above is no why?___________
____________________________________________________________
___________________________________________________________
10. Is the society using the service given by your organization in
proper manner? Yes No
11. If your answer for question above is not what factor do you
think responsible for that?
Heavy tax
Lack of demand
Lack of awareness
Other (please specify)___________________________________
12. Do you give training for employee? Yes No
13. Do you believe that your staff worker are well trained?
Yes No
14. If the above question is not what you planning to do the staff
workers? __________________________________________________
___________________________________________________________
15. As you think what are the major problems of the
institutions? ______________________________________________
____________________________________________________________
16. What is your general recommendation about the service
given by your organization?_________________________________
____________________________________________________________
17. What king of major service given by you organization?______
____________________________________________________________
18. What is the major source of income for your organization?
____________________________________________________________
19. What is the major expenditure of the organization?
__________
___________________________________________________________

31
32