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.
Highlights
Poverty alleviation has been one of the key development challenges over the decades in most developing economies
To examine the key economic factor like income from activities financed by the loan that affect loan repayment performance of borrowers of microfinance institution (MFI)
The empirical analysis of the study has been conducted using binary logistic regression model, which deals with loan repayment performance in total of 11 explanatory variables included in this study
Summary
Poverty alleviation has been one of the key development challenges over the decades in most developing economies. One of the identified key constraints faced by the poor is lack of access to formal credit. Microfinance institutions were established to fill the gap of scarce finance resources by providing funds to the poor and lower income group to alleviating poverty and enhance their business activities. Well organized access and efficient provision of saving, credit and insurance facilities in particular can enable the poor to smooth their consumption, manage their risks better, build their assets gradually, develop their microenterprise, and enhance their income earning capacity. Microfinance helps to promote economic growth and development [8].To this end, the current study has tried to identify and examine determinants of loan repayment in MFIs in Gedeo zone, SNNPRS, Ethiopia
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
