|dc.description.abstract||In many low-income countries, like Ethiopia, the prevailing operation of the formal financial
institutions is inefficient to provide sustainable credit facilities to the poor. Hence, micro finance
programs have been developed. Their main purpose is to provide financial service to the poor to
become self-employed and thus escape poverty. The aim of WISDOM Microfinance Institution is
also to provide financial service to the able poor who are not addressed by the formal financial
institutions. One of the major problems in provision of financial service to the poor by WISDOM
is loan default.
This study was conducted with the aim of assessing loan provision and causes for default using
primary data collected through open and closed ended questionnaire from both clients and
employees and interview with employees. Out of 1379 active clients of WISDOM Wolkite
(main) branch a sample of 150 was selected randomly for this study. The result from data
analysis shows that higher proportion of female respondents in the sample. Therefore, it indicates
that WISDOM has done better to improve the life of women in the community by providing
The results from descriptive statistics shows that low level of education, single and low level of
income for large size families, high interest rate, insufficient loan size, availability of other credit
sources, purpose of loan, insufficient supervision and advisory visit, lack of skill based training
and infrastructure facilities are the causes for loan default of the branch.
The institution should collaborate with government and non-governmental organizations (NGOs)
to provide microfinancing service for skill-based trained clients; and provide business-oriented
trainings, and counseling services. Revisit sufficiency of loan size and the interest rate in
accordance with national financial policy. Networking with all MFIs operating in the area, and
local government structures to work together to avoid getting loan from different sources.
The overall objective of MFIs in Ethiopia is to increase the productive potential of the poor and
poverty reduction. Therefore, strengthening the existing operation of WISDOM is appreciated||en_GB