MSC in Accounting and Finance

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Start date: 2024Subject: search.filters.subject.microfinance institutions

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    DETERMINANTS OF LIQUIDITY RISK IN ETHIOPIAN MICROFINANCE INSTITUTIONS
    (Hawassa University, 2024-04) TEKILE TESEMA KIA
    Studying determinants of liquidity risk in microfinance institutions (MFIs) in Ethiopia is important for several reasons: Liquidity risk refers to the ability of an institution to meet its financial obligations without incurring significant losses. If MFIs are unable to manage liquidity risk effectively, they may face financial instability or even bankruptcy. Hence, studying determinants of liquidity risk in microfinance institutions in Ethiopia is essential for ensuring financial stability, protecting client interests, promoting sector development, and aligning practices with international standards. This study examines the determinants of liquidity risk in Eleven Ethiopian microfinance institutions over the period 2009 to 2022. The study investigates the impact of eight independent variables, namely capital adequacy ratio, non-performing loan, lending interest rate, cost of fund, return on asset, rate of deposit, inflation, and gross domestic product, on liquidity risk. The regression analysis reveals that capital adequacy ratio, non performing loan, cost of fund, return on asset, and rate of deposit significantly influence liquidity risk in these microfinance institutions. However, lending interest rate, inflation, and gross domestic product do not exhibit a statistically significant relationship with liquidity risk. These findings provide valuable insights for policymakers and microfinance institutions in managing liquidity risk and ensuring financial stability.
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    THE EFFECT OF LOAN DELINQUENCY ON FINANCIAL PERFORMANCE OF MICRO FINANCE INSTITUTION IN ETHIOPIA
    (Hawassa University, 2024-03) ASAYE KONTAMO
    This study examines the impact of loan delinquency on the financial performance of 11 microfinance institutions in Ethiopia from 2008 to 2021. Using a quantitative research approach with an explanatory research design, the researcher employs regression analysis to investigate the determinants of return on assets (ROA). The findings align with prior research, showing a negative relationship between nonperforming loans (NPL) and ROA. Higher NPLs indicate increased credit risk and potential losses, consistent with theoretical expectations and previous studies. Similarly, a negative relationship is found between credit to deposit ratio (CDR) and ROA, suggesting that greater reliance on credit for funding is associated with higher risk and potentially lower profitability. However, the positive coefficients on capital adequacy (CA) and firm size (FS) confirm prior research indicating that well-capitalized and larger entities perform better financially. Surprisingly, the loan loss provision ratio (LLP) and cost per asset ratio (CPL) were found to be statistically insignificant in determining ROA. These results imply that the significance of these variables may be context-specific or subject to variations across industries or time periods. This study contributes to the understanding of the relationship between loan delinquency and financial performance in the Ethiopian microfinance sector.