Factors Affecting Loan Repayment Performance of Borrowers in the Case of Dashen Bank Addis Ababa District
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Date
2021-01
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Abstract
The loan is a single largest asset in banks’ balance sheet. Thus, it’s essential to learn about the
factors that affect this asset. However; some of the loan given out become non-performing or end
up in default and adversely affect the financial performance of commercial banks.
Dashen bank A.A district currently provides different types of loan to its customers. But its nonperforming
loan rate is becoming high and high comparing to the previous periods.
Although different studies were undertaken to find out the different factors that contributed for
non-performing loans most of them concentrated on micro finance which can’t be generalized to
the bank context in addition to this new factors like effect of covid 19 and corruption was
included in the study.
The general objective of the study is to identify and explain how and which client, lender and
business characteristics affect loan repayment performance of Dashen bank A.A district
borrowers.
Identifying factors that affect successful loan repayment will help Dashen Bank to be aware of
the current factors influencing loan repayment performance and reformulate appropriate credit
program.
There are many researches regarding repayment of loans, in Ethiopia as well as internationally.
The researcher’s states different empirical and theoretical literature reviews from different
perspective and titles. And Based on the objective of the study conceptual model has been
developed.
The research adopted descriptive research designing and it applied a qualitative and quantitative
research methodology. The quantitative data method will be employed to collect the primary data
from the sample respondents in relation to the socio-economic characteristics of borrowers,
business factors and loan related factors.
The hosmer and lemeshow test result shows that 0.821 which means that the model is fit in
addition Nagelkerke R Square suggests that the model explains roughly 88.5% of the variation in
the outcome or all the 19 variables together or jointly explain 88.5% of loan repayment
performance of a borrower by the model.
There are around 11 significant factors which can distinguishes credit worthy borrowers and not
creditworthy borrowers, so scrutinize borrowers based on those factors and give the loan to the
one which have high rate comparing to the other borrowers.
Keywords: borrowers, loan repayment, logistic mode
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Keywords
borrowers, loan repayment, logistic mode