Universal Journal of Accounting and Finance Vol. 6(3), pp. 108 - 122
DOI: 10.13189/ujaf.2018.060303
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Determinants of Loan Repayment: The Case of Microfinance Institutions in Gedeo Zone, SNNPRS, Ethiopia


Girma Gudde Jote *
Accounting and Finance Department, Dilla University, Dilla, Ethiopia

ABSTRACT

The objective of this study was to identify and examine the determinants of loan repayment in MFIs in Gedeo zone, SNNPRS, Ethiopia. In fact, identifying and examining such determinant factors of loan repayment is vital in the achievement of profitability and sustainability of MFIs. Out of total population of 6662 (1610 defaulter and 5052 non-defaulter borrowers), 364 representative sample from borrowers are selected by using stratified random sampling from borrowers by dividing the borrowers in to two strata, in terms of loan payment status as defaulters and non-defaulters. In this connection, the researcher collected data from primary and secondary sources and analyzed by using binary logistic model. A total of ten explanatory variables were included in this model and out of these, six variables were found to be statistically significant to influence the probability of loan repayment. These significant variables are: educational level, method of lending, nearness of borrower's residence to the institutions, family size, and income from activities financed by loan and training. The researcher suggests that the identified significant variables to be a spring board for further interventions by Microfinance institutions, stakeholders and policy makers so as to come with a breakthrough to significantly decrease or even avoid defaulting problems. On the basis of the study findings, the researcher also provided some recommendations that are vital to reduce loan repayment problems and improve loan repayment performance of borrowers in the study area. These includes: proper training, continuous supervision, enough loan officers or committee and technical support for borrowers on profitable business activities.

KEYWORDS
Microfinance Institution, Loan Repayment, Defaulters and Non-defaulters

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Girma Gudde Jote , "Determinants of Loan Repayment: The Case of Microfinance Institutions in Gedeo Zone, SNNPRS, Ethiopia," Universal Journal of Accounting and Finance, Vol. 6, No. 3, pp. 108 - 122, 2018. DOI: 10.13189/ujaf.2018.060303.

(b). APA Format:
Girma Gudde Jote (2018). Determinants of Loan Repayment: The Case of Microfinance Institutions in Gedeo Zone, SNNPRS, Ethiopia. Universal Journal of Accounting and Finance, 6(3), 108 - 122. DOI: 10.13189/ujaf.2018.060303.