Evaluation of Financial and Operational Performance: A Case Study of DECSI - Mekelle Branch No 1, in Tigray, Ethiopia

Abstract

The overall objectives of all MFIs in the world would be mobilizing the vast majority of the poor people in order to participating in the economic activity with little support from the institutions and making profit for their continued existence. To attain these objectives the institutions should work towards institutional Profitability and sustainability; because these factors are the most comprehensive and reflect the ability of the MFI to continue operating in the future. This is possible only if the institutions are measure their financial as well as operational performance using measurement indicators which are developed by different scholars. The objectives of DECSI in brief are food security, creation of job opportunity and stimulating the local economy. To achieve these objectives, the institution has been striving for financial viability and sustainability. To acknowledge its right position, the performance of the institution should be measured every time. As a result, this research project describes financial and operational performance of DECSI- Mekelle branch No 1; with the main objective of “evaluating financial and operational performance” of the branch as a case study. The researcher focuses mainly on the outreach, portfolio quality, profitability, productivity, efficiency, financial management, and financial sustainability of the branch’s performance. Data for the study was from primary source through unstructured personal interview with different management bodies of the institution and secondary sources of financial statement and operational data were analyzed via different techniques and performance indicators. In order to see the trend in performance, five years data (2005 to 2009) were used and revealed using tables, figures, and ratios. The major findings of the study indicate that, the performance of the branch have declined in terms of outreach, efficiency, productivity, profitability and financial sustainability in last year (2009). However; the overall performance of the branch is encouraging. It attains operational self sufficiency beyond threshold, ROE and ROA are attractive and an average portfolio at risk is too low (only 0.75% for days 91 to 180). In addition; the branch has good potential in terms of clients since it is located in the city.