Factors Affecting Repayment Performance of Borrowers- The case of Development Bank of Ethiopia (DBE) Head office

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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.


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


Relative riskratio( RRR), Repayment performance