Factors Affecting Loan Repayment Performance: The Case Of Siinqee Bank Found In West Shewa Zone

Abstract

This study examined the factors influencing loan repayment performance among borrowers of Siinqee Bank. To realize this researches a mixed- approach was employed, combining quantitative data collected through a survey with qualitative insights from in-depth interviews. The target population included borrowers and employees from the Toke Kutaye, Ambo, and Dandi branches of Siinqee Bank, with a total population of approximately 11,550. A sample size of 154 respondents was determined using Taro Yamane’s formula, ensuring a 95% confidence level and a 5% margin of error. Structured questionnaires were used to collect data from borrowers, while interviews were conducted with bank managers. Descriptive statistics and binary logistic regression were used to analyze the quantitative data, while qualitative data were analyzed using a narrative approach. The study found that borrowers aged 35 and above exhibited stronger repayment performance, while younger borrowers (18-34 years) showed higher default rates. Other factors such as educational attainment, family size, borrower experience, marital status, loan diversion, and political instability were identified as significant predictors of loan repayment behavior. The findings suggested that borrowers with higher education levels, smaller family sizes, and more years of borrowing experience were more likely to repay their loans. Additionally, married borrowers were found to be 25% more likely to repay their loans. In contrast, loan diversion and political instability were found to increase the likelihood of default by 40% and 35%, respectively. Based on the findings, the study recommended targeted financial education, improved loan processing procedures, and stronger legal enforcement to reduce defaults and improve repayment rates. The study contributed valuable insights into loan repayment behavior, providing implications for financial institutions aiming to enhance loan recovery rates. Future research could explore the psychological factors influencing loan repayment and the long-term trends in loan performance.