Determinants Of Group Loan Repayment Performance Of Small And Medium Enterprises: A Case Of Shaggar City Siinqee Bank S.C

Abstract

The study was conducted in Shaggar city of Oromia regional states. It was intended or aimed to analyze the determinants of group loan repayment performance of SME’s sectors that were financed by Siinqee Bank Share Company operating in the city and this is because the loan repayment status of SME sectors for the successive past three years indicated that 11.96% default rate in the study area. In this study the determining factors were categorized as groups or enterprises related, institutional or lender related, environmental related, economical related and the social related factors that were analyzed study separately. The survey data was conducted by using purposive sampling technique from the purposively selected branches under the Sub-city of the City depending up on branches having a number of defaulted borrowers comparatively by using the structured questionnaire in order to collect primary data whereas secondary data were used from published and unpublished documents of their office. Out of 406 total number of groups owned of MSE’s sectors 162 sample size were selected and only 146 of the sampled respondents were filled the questionnaire properly by their respective enterprise’s group leaders. From the sampled respondents 63 of them were non defaulters, 51 of them were risky (warned by letter) and 32 of them were defaulters in the study area. The collected data were analyzed by employing descriptive statistics and ordered logit model by using STATA software version 14. This result indicates that out of 23 predicting variables used in this study, 15 of them were found being significant and positively or negatively influenced the groups loan repayment performance of SME Sectors in the study area. On the basis of this study, some conclusions and recommendations were drawn and forwarded respectively which enables the SME’s sectors to improve their loan repayment performance by focusing on the smaller the group size through which the problem of information disclosure would be resolved ,loan officers of SIINQEE Bank S.C should have to give frequent training about the financial statement recording experience, saving habit they have to deal with the concerned body to solve the problem of price instability as well as about the equity contribution ratio and collateral value around the enterprise’s business area and encouraging them to increase their beginning capital at the enterprise start up that used to build confidence in their loan repayment performance in the study area.