Factors Affecting Loan Repayment Performances: A Case Study In Development Bank Of Ethiopia, Burayu District

Abstract

This research deals with the factors affecting of loan repayment performances in Development Bank of Ethiopia Burayu District. Accordingly, endeavors are made to contribute to the empirical gap regarding factors affecting loan repayment performances specifically in Burayu District. The main objective of this study was to investigate the Factors affecting loan repayment performance, in Development Bank of Ethiopia Burayu District; more specifically from four different perspectives, borrowers related factors, Bank related factors, business/project related factors and factors related to external environments. Both primary and secondary data were used in the study. The primary data was collected from 91 borrowers out of 96 sample selected borrowers through questionnaires and pre-tested structured interview with staffs and bank managers. To define and select the population of the study, Convenience sampling was used where borrowers based on their loan status. Both descriptive statistics and econometric analyses particularly logistic regression (binary logit) were employed to present the results and findings of the research. A total of twenty one explanatory variables were included in the logistic regression and out of these eight were found to be statistically significant to influence the dependent variables. And also the rest of 13 explanatory variables have positive and negative relationship with dependent variable but insignificant. The results of binary logistic regression revealed that Age of borrowers, marital status of borrowers, credit experience, business sector, income sufficient, loan size, Know Your Customer and weather condition were found significant and influenced loan repayment performances. Based on the descriptive and econometric results/analysis, the researcher has recommended to the bank to undertake proper screening, Borrowers who are middle aged, married, credit experienced and have sufficient income. And provide sufficient amount of loan as per the feasibility study of the project, solve other difficulties as identified in this study and work on all other factors affecting loan repayment performances.