Factors influencing default project financing (A case study of Development Bank of Ethiopia)

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The commencement, grant, servicing and monitoring of loans by financial intermediaries has been done without consider to some critical factors, which could have averted the odds of default. This study intends to assess factors influencing Default project financing, the mixed research approach was adopted for the study. Survey was conducted with Customers of under the direct management of Head office Development Banks of Ethiopia using a self-administered questionnaire from the Customer view point, based on a Likert five scale questioner collected from 134 Customers through stratified sampling method. In addition, the study used structured review of documents and records of banks and adopted descriptive research design and inferential statistics in which multiple linear regression analysis was applied and correlation analysis assessed the relationship between loan default and the independent variables The main finding of the study is that; explanatory variables such as Loan Processing, use Technology & Technology adoption, Willful Default and Borrowers Organizational Capacity are significant influence on loan default. But Loan Diversion and Amount of Loan has no significant influence on loan default. Thus, it is suggested that the Bank shall put in place strong monitoring and follow-up mechanism by consistently visiting the business site and maintaining good communication with the customer about the use of fund and the project’s Performance, early warning signals and give remedy before the major problem is materialize, exert the check and balance system through monitoring and evolution and needs technical audit section to protect from default, the Bank shall include enforcing and tangible system exercised by the borrower, the bank also strictly implement the use of technology as per the design and avoid second hand machinery since there is a cost overrun and high amount of maintenance cost


Thesissubmitted To The Department Of Management For Partial Fulfillment Of The Requirements For The Degree Of Master Of Science (Msc) In Management


Development Bank of Ethiopia, Non-performing loan