Determinants of Loan Repayment Among Small Scale Enterprises

The study analyzed loan repayment among entrepreneurs of small and microenterprises financed by Addis Credit and Savings Institution in Addis Ababa. It specifically identified socio-economic characteristics of the respondents and quantitatively determined some socio-economic characteristics of these entrepreneurs that influence their level of loan repayments. While, age, alternative source of income, years of business experience, voluntary saving, sex, type of business activity and educational background of the borrowers found to be positively related with loan repayment status of the borrowers, loan diversion was found to affect negatively. On the other hand, household size, financial recording and marital status found to be statistically insignificant to affect the loan repayment status of the borrowers. The result of the repayment function showed that the included regressors explained 56.03% the variation of the regressand. According to these findings the institution is recommended to see into these factors with care and design a better lending strategy focusing on effective supervision, training and approval of appropriate loan size so as to minimize the loan default.

Autorentext

Mulualem has a Masters of Art Degree in Regional and Local Development Studies and BA in Economics. Mulualem has over 10 years of experience working as advisor and programme manager for GIZ, UK Embassy in Ethiopia and many line ministries of the Government of Ethiopia on the area of social protection.