Abstract:
The objective of this study was to determine factors affecting borrower‟s loan repayment
performance in OCSSCO Special zone Burayu branch. Microfinance is one of tool an important
strategy to alleviate poverty in developing countries .The frame work of this study was built by
four factors namely borrowers characteristics, business characteristics, loan characteristics and
lenders characteristic. The study used mixed methodology combining between quantitative and
qualitative data through survey questionnaires and in depth interview. The main study was
conducted based on quantitative method and supported by qualitative data. Data were collected
using simple random sampling techniques; accordingly 110 sample respondents were selected
from the total population of 680 borrowers. To conduct this study the researcher employed the
logit model. Credit repayment performance was dependent variable and explanatory variables of
the model include those which were hypothesized to have an association with loan repayment
performance. For the purpose of this study the researcher has constructed 14 independent
variables assuming that they are best to explain the determinants of loan repayment performance
of OCSSCO Burayu branch borrowers.
The analysis began with a descriptive analysis followed by binary logit regression analysis. The
descriptive model used t-test and chi- square test to compare defaulters and none defaulters based
on explanatory variables. The result of econometrics model revealed that out of the fourteen
explanatory variables, six were found to be significant. Gender and suitability of repayment
period were negatively related with credit repayment performance, whereas loan supervision,
availability of other sources of income, house hold size, and adequacy of the loan were positively
related with credit repayment performance. This study contributes significantly to the knowledge
of microfinance program at large, where it explains that repayment performance plays an
important role to ensure that MFIs can continue providing microfinance to the micro
entrepreneurs without depending on subsidies. The repayment period should be revised, because
to be profitable and repay the loan easily adequate repayment period is required. Hence female
borrowers are large in number and more female borrowers were defaulters than male borrowers,
especial training should be given to female borrowers.
