Abstract:
The purpose of this study was to compare the extent of loan repayment between Busa Gonofa Micro Finance and Oromia Saving and Credit Cooperative Organization. Loan repayment has paramount importance for most developing countries, because lack of financial resources is usually regarded as a major obstacle to the development of countries. The specific objectives of the study were to evaluate the percentage of loan default and challenges contributing to Loan default rate in OCSSCO and BGMFI. To compare the repayment performance of these institutions, the study used descriptive survey research design, and both quantitative and qualitative research methods were employed. Accordingly, data were collected from 119 participants from the two lending institutions through questionnaire, interview and observation; and analyzed using descriptive statistics and qualitatively (content analysis and description). The results of the study shows that loan repayments were caused by borrower’s family problems, unfavorable financial lending strategies, policy implemented by some lenders, high interest rate, multiple loans. On top, educational level, supervision, available of other source of credit and monthly repayment period are found to be positively related to repaying loan in full in a loan period of one year. Loan diversion and loan size has negative relations. Hence, it is advisable to credit schemes initiatives to make more attention to investigate factors that affect loan repayment performance which enables the problem to reach millions of poor. The right direction of saving and improving the livelihood of the poor borrowers both by government and stakeholders should be involved in preparation of a transparency and favorable balanced Microfinance Policy that will aim to assist the poor borrowers
