Abstract:
The objective of this study was to determine factors affecting borrower’s loan repayment
performance in OCSSCO-Bale zone Goba branch. 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 256 sample respondents were selected
from the total population of 3210 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-Goba 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, where as 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.
