Factors Influencing Loan Repayment Performance of Micro and Small Enterprise Borrowers Financed by Micro-finance Institution; The Case of Oromia Credit and Saving S.C (OCSSCO).
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Date
2018-01
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Addis Ababa University
Abstract
Microfinance institutions in Ethiopia are playing an important role in poverty reduction
strategies initiated by the government of Ethiopia. These institutions have a mission of creating
and facilitating credit and other financial schemes to enhance self-employment opportunities and
poverty reduction. There have been challenges in the microfinance institutions’ regarding
reducing the high rate of default by their clients specifically with micro and small enterprise
borrowers. Thus, the study objective was to identify factors influencing the loan repayment
performance of MSE’s financed by MFI, in the Case of Oromia Credit and Saving S.C
(OCSSCO).To address the main objectives of the study, four zonal offices of Oromia credit and
saving Share Company were selected for the study purpose. Accordingly, in order to achieve the
objective 329 sample borrowers were selected from the total of MSE borrowers served by those
selected MF zonal offices. The data were collected using a structured questionnaires, and
interviews. The descriptive statistics analysis and probit regression model were employed to
estimate the model and analyze the results of findings. The result shows that eight variables
including constant: monitoring utilization of other members in a enterprises, loan disbursement
timeliness, repayment schedule suitability, repayment trend on monthly basis, repayment trend in
irregular basis supervision on monthly basis and training adequacy are found significantly
influence loan repayment performance of borrowers. Thus, it is recommended that the lending
institutes need to focus on monitoring loan utilization systems of borrowers and technical
support needs of the target borrowers through delivering better awareness creation to organize
the more viable borrowers, close supervision, and follow-ups and strengthening their internal
and external weaknesses through better training.
Description
A thesis submitted in the partial fulfillment of the
Requirements for the degree of masters of Science in
Accounting and finance
Keywords
Borrowers, Default, Loan repayment, Microfinance