| Abstract: | Microfinance institutions in Ethiopia are playing an important role in poverty reduction
strategies to support lower-income groups, get funds for their business activities, and improve
their lives. To address the main objectives of the study, Awach Saving and Credit Corporative
Society was selected for the purpose of the study. This study was conducted with the objective of
analyzing and identifying the factors that influence the loan repayment performance of the
beneficiaries of ASCCS. In order to achieve this objective, we collected primary data from 100
randomly selected clients using a structured questionnaire and interview. For the data analysis,
descriptive statistics, including frequency and percentages were used to describe the socioeconomic characteristics of the borrowers. A binary logit model was used to analyze the socioeconomic factors that influence loan repayment. A total of twelve explanatory variables were
included in the regression. Out of these, six variables were found to be significant for the
probability of being a defaulter. Sex, education level, marital status, family size, business
success, and interest rate were important in influencing the loan repayment performance of the
borrower. While Age, business experience, business type, training, distance from home, and
marketing research is not a significant factor for loan repayment performance. Awach Saving
and Credit Cooperative Society has a number of internal and external problems like a shortage
of loanable funds for further expansion, competition, and improper interference of the third party
in the decision of loan approval. In order to solve the internal and external problems of the
institution, the main thing might be improve the financial capacity of the institution, increase
loan size and expand the services. |
