The Effect of Liquidity Management on the Viability of Microfinance Institutions of Ethiopia
Article Sidebar
Main Article Content
Abstract
Purpose: Micro-finance institutions have a great contribution to the development of every country’s economy through strengthening society's financial requirements. The institutions need to have adequate liquidity to generate sustainable profit. The main intention of the paper was to investigate liquidity’s impact on Micro-finance institutions’ profitability. Research Methodology: Ten years of secondary data were used from 12 Microfinance institutions and fixed effect regression analysis by the use of E-views version 7 software. Return on assets used as the proxy of profitability to evaluate the financial healthiness of MFIs. Results: This study found that the deposit loan ratio has a significant and negative impact on profitability statistically. Whereas, the debt-to-equity ratio shows a negative signal on Micro-finance Institutions (MFIs) profitability but statistically insignificant. The impact regarding size and deposit asset ratios was positive and significant on MFIs’ profitability of Ethiopia. Limitations: Lack of empirical study on the topic was the basic constraint of the study. Contribution: The study concentrated on the financial institutions specifically on microfinance firms. This study helps the institution’s management to give appropriate considerations for each component to preserve an optimal level of liquidity and sustainable profit.
Downloads
Article Details
How to Cite
References
Abebe, Aster Ketema, Idris Ali, and Meseret Tadesse Abera. 2019. “Assessment of Public Finance Management: Accounting And Reporting Practice: Evidence from Mizan-Tepi University, Bench Maji, Kaffa and Sheka Zone (Finance and Budget Sections).” Journal of Accounting Finance and Auditing Studies (JAFAS) 5(1):100–121. doi: 10.32602/jafas.2019.5. https://doi.org/10.32602/jafas.2019.5
Akramovna, I. N., Takhirjonovna, A. S., & Kholmatjanovich, M. B. (2019). Risk Management and Insurance. In International Journal of Innovative Technology and Exploring Engineering (Vol. 8, Issue 12, pp. 5429–5432). https://doi.org/10.35940/ijitee.g5722.1081219
Alshatti, Ali Sulieman. 2015. “The Effect of the Liquidity Management on Profitability in the Jordanian Commercial Banks.” 10(1):62–71. doi: 10.5539/ijbm.v10n1p62. https://doi.org/10.5539/ijbm.v10n1p62
Basu, Anupam, Rodolphe Blavy, and Murat Â. Yülek. 2004. “Microfinance in Africa: Experience and Lessons From Selected African Countries.” IMF Working Papers 04(174):1. doi: https://doi.org/10.5089/9781451858723.001
Eljelly, Abuzar. 2015. “Liquidity - Profitability Tradeoff : An Empirical Investigation in an Emerging Market.” (March). doi: https://doi.org/10.1108/10569210480000179
Gazeta, Federal Negarit. 2009. “Negarit Gazeta.” Proclamation No. 626 /2009, Addis Ababa, Ethiopia (15th Year No.33):Micro-Financing Business Proclamation Page ……. 470.
Miganda, Mr. J. N., Gwaya, Dr. A., & Githae, Dr. W. (2020). Effectiveness of Risk Management in NG-CDF Construction Projects in Nairobi County. In International Journal of Soft Computing and Engineering (Vol. 10, Issue 1, pp. 40–44). https://doi.org/10.35940/ijsce.a3455.0710120
Nayak, M. (2020). A Method for Effective IT Project Risk Management. In International Journal of Engineering and Advanced Technology (Vol. 9, Issue 3, pp. 3480–3484). https://doi.org/10.35940/ijeat.c5629.029320
Priya, Ms. K., & Lal, Dr. P. (2024). Awareness and Competence in Financial Literacy and Planning: The Financial Journey of Working Women. In International Journal of Management and Humanities (Vol. 10, Issue 8, pp. 17–22). https://doi.org/10.35940/ijmh.H1700.10080424
Prokopenko, O., Kholod, B., Pavlova, V., Niziaieva, V., Shtepa, O., & Orlova, V. (2019). Risk Management Culture as a Systematic Method for Ensuring Safety Development. In International Journal of Recent Technology and Engineering (IJRTE) (Vol. 8, Issue 4, pp. 8652–8657). https://doi.org/10.35940/ijrte.d8653.118419
Rahman, Mohd Abdur, and Ahmad Rizal Mazlan. 2014. “Determinants of Financial Sustainability of Microfinance Institutions in Bangladesh.” International Journal of Economics and Finance 6(9):107–16. doi: 10.5539/ijef.v6n9p107. https://doi.org/10.5539/ijef.v6n9p107
Sharma, Dhiraj. 2008. Modern Banking And Working Capital Management. Patiala, Punjab, India: Himalaya Publishing House, Mombai, India.
Tewodros, Biset Amene, and Abayneh Alemu Gedion. 2019. “Determinants of Financial Performance in Private Banks: A Case in Ethiopia.” African Journal of Business Management 13(9):291–308. doi: 10.5897/ajbm2019.8771. https://doi.org/10.5897/AJBM2019.8771
Yimer, Idris Ali, and Hailu Tilahun. 2024. “Role of Capital Structure in the Profitability of Private Banks in Ethiopia.” IUP Journal of Bank Management 27–40(November 2023):1–6.
https://iupindia.in/1123/Bank%20Management/Role_of_Capital.asp
Yimer, Idris Ali, and Siraye Mekuriaw. 2024. “Firm-Specific Factors That Affect The Effectiveness of Accounting Information System ( AIS ) Practice in Wolkite Branch CBE , Ethiopia.” MAT Journals 5(1):1–7. https://doi.org/10.46610/JARBFM.2024.v05i01.002
Yimer, Idris Ali, and Temesgen Setegn. 2024. “The Dynamics of Tax Assortment in Municipality, Ethiopia.” Journal of Economic Studies and Financial Research 5(1):1–14. doi: https://doi.org/10.46610/JESFR.2024.v05i01.001
Yimer, Idris Ali, and Dr Dhiraj Sharma. 2024. “Impact Of Company-Specific Determinants Of Dividend Payout On Manufacturing Companies: A Review Eur. Chem. Bull. 2024, 13(Regular Issue 01), 123 – 130 DOI: http://dx.doi.org/10.53555/ecb/2024.13.01.11
Yimer, Idris Ali, and Dhiraj Sharma. 2024. “Elucidation of Dividend Payout Determinants on Manufacturing Companies : A Systematic Review.” 0913(12):14–18. doi: https://dx.doi.org/10.35940/ijmh.j1717.10120824