Lending Patterns and Determinants of Microfinance Institutions Profitability in Ethiopian Microfinance institutions

Abstract

This paper emphasizes the lending patterns and determinants of the microfinance institutions' profitability in Ethiopian by taking the different levels and ownership microfinance institutions with survey data in an ordered logistic regression model. The variables of the study such as the loan term, collaterals, knowledge for credit, costs of the loan, interest rates, loan size, lending methodology, credit information and credit repayment period have statistically significant and creates the relationships with the microfinance institutions profitability by holding the positive and negative signs. In the underlying study, the directions of the signs of the variables show that the lending patterns of the microfinance institutions support the profitability status and also the other consequences that affect the microfinance institutions' profitability status. Under the results of the study, the lending patterns of the microfinance institutions bring advantages to the microfinance institutions' to recognizes financial sustainability and healthy financial operations. Although the microfinance institutions' profitability determinant shares the other financial institutions' determinant of profitability variables. The study recommends for a future line of studies to undertake the on the determinants of the microfinance institutions' profitability, addresses the study with taking into accounts of the lending patterns of the institutions as internal factors and also other financial institutions determining factors to investigate and accomplishes the future dreams of the microfinance institutions.