Determinants of successful loan repayment performance in foreign owned investments in Ethiopia: the case of development bank of Ethiopia and commercial bank of Ethiopia
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Date
2019-10
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A.A.U.
Abstract
This research paper aims to identify the determinants of successful loan repayment performance in foreign owned investments in Ethiopia. Clear understanding of these factors would enable borrowers and financing banks to develop suitable marketing strategies, business models, processes, and pilot projects. To address the research objective, about 97total foreign direct investors who borrow from Commercial Bank of Ethiopia and Development Bank of Ethiopia. Purposive sampling methods were used. Questioners were distributed to 97 different respondents, from which 96 sample respondents replied appropriately to the questionnaire. Data gathered were analyzed based on these 96 responses using SPSS 20 software package. Descriptive statistics and explanatory research approaches were employed. All out puts were reported using frequency, correlation and multiple linear regression analysis results such as ANOVA and coefficient and regression results were used. The result indicates that sufficient loan size and flexible loan repayment period were the most statistically significant determining factors affecting Successful loan repayment performance. During inflation amount of loan default is high and if banks couldn’t adjust repayment schedule during inflation the borrowers would unable to repay their loan efficiently and effectively and there might be loan default. Thus, if there is inflation, loan default may increase and borrower couldn’t pay their loan successfully. Therefore, inflation has statistically significant and negative association with loan repayment.
The study recommended that sufficient and larger amount of loan would enhance the investors’ access to basic inputs and improved business management opportunities, which would lead to higher productivity, reduced per unit cost and increased income. Thus, lending institution should disburse sufficient amount of money equivalent to loan applied by the investors.
Description
A thesis submitted to the Department of Public Administration and Development Management of Addis Ababa University in partial fulfillment of the requirements for the Degree of Masters in Public Management and Policy (MPMP)
Keywords
Experience, Foreign direct investors, Inflation, Loan size