Factors Affecting Repayment Performance of Borrowers- The case of Development Bank of Ethiopia (DBE) Head office
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Date
2020-06
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Publisher
A.A.U
Abstract
Borrowers’ repayment performance is about how borrowers behave in repaying the
borrowed fund. In this regard a borrower behavior may fall in one of the three outcomes. 1.
Paying at expected or earlier time than expected, 2. Paying in arrears and 3. Stop paying
and become default. These repayment outcomes are determined by internal and external
factors in which the borrowers are living. The objective of the study was to identify factors
that affect repayment performance of borrowers at Development Bank of Ethiopia. The total
study population 137 was categorised in three strata. The first stratum composed of 51
cases without payment problem, 23 were included in the sample. Similarly in the second
stratum of 53 cases with delinquent status 28 were included in the sample and finally from
the 33 cases in NPL category, 19 cases were included. Quantitative research approach
and explanatory research design were used in the research. Secondary data sources were
used to acquire data pertaining to the individual borrowers, the loan and the project for
which the loan is taken. From the nine independent variables included in the study, four
variables namely loan size, loan tenure, business, experience and nationality were
significant in explaining variations in the categorical dependent variables at 1%, 5% and
10% level of confidence. To improve the repayment performance of the borrowers it is
important to consider loan rescheduling for short and medium loans as long term loan
shown better repayment status, balance loan release with the project work already executed
and assess the progress of the project to repay the loan since big loans have poor payment
status, assigning of loan follow-up activities of projects located in remote location to
nearby districts and finally, the bank should work toward inclusion of significant variables
as collateral value, past business experience of the borrower in their loans decision.
Description
A Thesis Submitted to College of Finance and Economics Addis Ababa
University, in Partial Fulfilment of the Requirements for the Award of
MBA in Finance
Keywords
Relative riskratio( RRR), Repayment performance