HARAMAYA UNIVERSITY POSTGRADUATE PROGRAMMES DIRECTORATE Effect of Risk Management on Microfinance and poverty Reduction: The case of Haramaya District Finance Institution

Abstract

Microfinance as a tool for poverty alleviation has become the main subject of many global and regional conferences, seminars and workshops. Ethiopia is not an exception. The study was conducted with the aim of analyzing effects of risk management on microfinance and poverty reduction the case of Haramaya district factors on the livelihood of borrowers, using primary data collected through structured questionnaire from 127 respondents. The empirical analysis of the study was conducted using both descriptive statistics and OLS regression analysis. The results of the study indicate the microfinance program has positive effect on poverty alleviation through improvement in their business. The results of the OLS regression analysis show that educatio, loan supervision, suitability of repayment period, availability of other credit sources are the significant factors that enhance the loan repayment performance, while loan diversion and loan size are found to significantly increase loan default. In addition, female borrowers were found to be better in terms of loan repayment. According to these findings the institution is recommended to see into these factors with care and design a better lending strategy. Regarding their perception, supervision as adequate and the repayment period as suitable were favored. The credit scheme was also found to have positive impact in improving the income, education, health and living standard of the borrowers as evidenced by statistical test that compares the situations before and after participation in the credit scheme. therefore, recommends that HDMFI should endeavor to extend more credit facilities to the lower income people to economically empower them. Finally,