Determinants of Loan Repayments: The Case of Addis Credit and Saving Institution Share Company in Addis Abeba City.

Abstract

The main objective of this study was to examine major determinants of loan repayment performance in the AdCSI branch. Primary data was collected from 168 sample borrowers using a questionnaire. Substantial primary data was also collected from the manager and loan officers of the AdCSI using interviews. Secondary data was collected through reviewing documents. Descriptive statistics including mean, frequency, and percentage were used to describe borrowers’ socio-economic, business, and loan-related characteristics. T-test and chi-square analyses were also used to compare the variation in some selected socioeconomic, business, and loan-related factors between borrowers. Moreover, a binary logistic regression analysis was used to analyze the socio-economic, business, and loan-related factors that influence loan repayment performance. The findings showed that all the socio-economic independent variables borrowers’ gender, age, place of residence, marital status, educational level, family size, source of income from activities not financed by the received loan, and monthly income level earned from activities financed by the loan significantly determine loan repayment performance. The findings also revealed that business-related factors like having saving account experience, financial records experience, business experience, and business information significantly determine loan repayment performance, but conducting market studies before starting a business has no significant influence on the loan repayment performance of borrowers. Among the loan related independent variables included in this study, the analysis revealed that except for training conducted before taking loans significantly determine the loan repayment performance of borrowers. The study recommended that Addis credit and saving institutions must take steps to reduce their bad debts since it affects their lending abilities and financial performance. Also, an effort must be made by this institution to empower their credit staff with the necessary skills and tools to enhance credit administration within the institution to significantly. In order to solve the internal and external problems of XI the institution, the main thing might be improve the financial capacity of the institution and expand the services..