EXAMINING THE LAWS REGULATING OWNERSHIP STRUCTURE AND FORECLOSURE IN MICRO FINANCE INSTITUTIONS IN ETHIOPIA

Abstract

Many people in Ethiopia have been given access to formal financial services through microfinance programs. However, currently millions of potential clients in the region remain unserved and the demand for financial services far exceeds the currently available supply. Microfinance institutions mainly relied on government, NGOs and associations for their finances. Hence the sectors are characterized by capital constraint. Because of this their service is limited to specific locations of the region. There is weak private investors’ participation in the sectors due to absence of dividend of profit and free transfer of shares. More over the sector is characterized by its weak repayment rate of loan because of absence of specific /separate/ foreclosure law which is suitable for their specific future. So the paper found that to establish sustainable and well outreached MFIs, there should be wide shareholders bases or solid ownership base and specific and adequate foreclosure laws that have its own procedural remedies. Hence absence of separate foreclosure law and weak ownership base are identified as the major obstacles for the sustainability of the MFIs. Microfinance institutions should give more emphasis to financial sustainability and making the environment suitable for private investors in order to reduce their subsidy dependence, ensure survival to achieve their social objective and growth in the future. The methodology employed for this study was qualitative and the data were collected from both primary and secondary sources by selecting the institutions purposively. Accordingly, the study recommends the concerning organ to refine the provision that regulate ownership structure and to enact comprehensive specific foreclosure law that have its own procedural remedies for execution.