Factors of Credit Risk Handling in Selected Microfinance Institutions of Ethiopia
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Abstract
This study examined how certain Ethiopian microfinance institutions manage credit risk. Microfinance institutions are a crucial means of raising substantial funds in developing nations. Secondary data sources were collected from specific microfinance institutions for this investigation. The years 2010 through 2018 were consecutively included in the collected data. The data were analysed using a balanced regression model. Purposive sampling was used to select the sample, and a quantitative research methodology was employed to achieve the study's objectives. The study's target population is the whole Ethiopian microfinance industry. An explanatory research design is used to achieve the study's aim. For analytical reasons, credit risk management is measured as the dependent variable. Moreover, explanatory (independent) factors include the loan-todeposit ratio, average loan balance per borrower, company development, managerial performance, and total assets. Credit risk is positively correlated with total assets, the loan-to-deposit ratio, management performance, and average loan balance per borrower, as indicated by a regression analysis in EViews 8. The study also recommended that companies enhance their overall asset value and management performance by implementing training and other strategic measures.
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