FACTORS INFLUENCING LOAN REPAYMENT PERFORMANCE IN MICROFINANCE INSTITUTION: THE CASE OF DEMBA GOFA WOREDA ETHIOPIA

Abstract

This study was conducted with the aim of analyzing the factors that influence loan repayment performance of borrowers in Demba-Gofa Woreda of Omo microfinance institution. A total of 330 respondents were involved in this study, of this 314 were borrowers and 16 were managers and credit officers. In order to give due emphasis for the generalization of the study the sample size was determined by using probability confidence method to draw representative samples. Primarily data were collected from respondents through structured questionnaire and secondary data were collected from different literature sources. The result demonstrated that age, educational level, additional income from other activity and loan diversion were factors they showed significant association with loan repayment performance. Compared to male borrowers, females’ barrowers were found to be better in terms of loan repayment performance. It is also found, number of dependents has no effect on loan repayment. Regarding institution related factors, the study results revealed that supervision made for loan utilization and loan repayment by credit officers was inadequate and borrowers 'feeling toward repayment period in this study, market problem, lack of adequate man power and shortage of resources were identified as the main repayment challenges from the forgoing it can be concluded that both barrowers and institution related factors are affecting loan repayment performance in the branch. Hence the institution is recommended to see into these factors with great care and should take a corrective action accordingly.