Loan Repayment Determinant: The Case Of Development Bank Of Ethiopia
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Date
2020-06
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Publisher
A.A.U
Abstract
Development Bank of Ethiopia plays vital role in supporting the national development agenda by
providing loan to viable projects. The study assessed Development Bank of Ethiopia borrower’s
loan repayment determinants in the project financing scheme. The study employed explanatory
research design and quantitative research approach. Both primary and secondary data was
collected from 131 projects financed from January 2012 G.C to June 2018 G.C. Primary data
was collected from respective contact officers through questionnaires while secondary data
collected from each individual files and from data base of the bank. The total population was
131, of which 95 (73%) were non-defaulters and 36(27%) were defaulters borrowers. The
variables considered in the study were loan amount, number of project follow-up( per year), loan
repayment period, educational level of borrowers/general manager, business experience of
borrowers/general manager, accessibility of market for product, grace period, technological
adoption, keeping of book of records and interest rate. In the study, Logit regression model was
employed to assess factors of loan repayment determinants of borrower’s. The study exposed
that loan amount, borrower’s educational level and its business experience, loan repayment
period, market accessibility, grace period and number of project follow-up are statistically
significant factors of loan repayment determinants of Development Bank of Ethiopia borrower’s
in the project financing scheme. Thus, it is recommended the bank needs to focus on seriously
evaluating loan request of the client and evaluate the purpose of the loan, made serious
appraisal study and make sure the loan amount is enough for the project establishment, requites
and gives priority for those educated and experienced customer , conduct continues and regular
follow up, grant longer repayment period for its borrower to lessen the periodic repayment,
provide longer grace period to start production and marketing of its borrower , and study
market destination of its borrower’s product before signed a loan contract agreement.
Description
A Thesissubmitted To The Department Of Management
For Partial Fulfillment Of The Requirements For The
Degree Of Master Of Science (Msc) In Management
Keywords
Defaulter, Logit model, Repayment