Abstract:
In developing countries like in Ethiopia Siinqee bank institutions are playing an essential role in poverty reduction; to provide the provision of micro-credit, savings, and other services to the poor that are excluded by the commercial banks for collateral and other reasons. However, there is a loan repayment problem, which discourages rural finance organizations from promoting and extending credit. Therefore, this study focuses on identifying factors that affect the credit repayment performance of smallholder farmers in Abuna Gindeberat district, Oromia National Regional State, Ethiopia. The study used both Purposive and simple random sampling technique to select sampled kebeles and households, respectively. The survey was conducted in four Kebeles; hence, 149 households were selected randomly, from Abuna Gindeberat district. Both primary and secondary data were used for this study. Descriptive statistics were employed to summarize and describe the socio-economic, demographic, institutional, and natural characteristics of the respondents. Furthermore, t-test and chi-square test analyses were employed to compare defaulters and non-defaulters with the explanatory variables. Also, binary logit econometric model was used to examine the factors that affect credit repayment performance of the selected sampled household borrows of ASBSC. The result showed that out of 149 chosen respondents, 63 were defaulters, and 86 were non-defaulters. The econometric result revealed that the celebration of the social ceremony, family size, and occurrences of natural calamities increases the probability of being a default. On the other hand, the probability of non-default increases as training, frequency of extension agent contact, the suitability of the repayment period, and the education level of the respondent increases, respectively. Therefore, the study recommended that the identified significant variables have to be a springboard for further interventions by financial institutions, stakeholders, and policymakers to come with a breakthrough to significantly decrease or even avoid defaulting problems
