Determinants of Loan Repayment Performance of Omo Microfinance Institution: In the Case of Mizan Aman Town, Southwest Ethiopia


	Research Journal of Business Management
	Year: 2020 \| Volume: 14 \| Issue: 1 \| Page No.: 7-14 DOI: 10.3923/rjbm.2020.7.14

Determinants of Loan Repayment Performance of Omo Microfinance Institution: In the Case of Mizan Aman Town, Southwest Ethiopia

Mikir Melese and Milkessa Asfaw

Abstract: Background and Objective: In developing countries like Ethiopia Microfinance institutions are playing an essential role in poverty reduction, to provide the provision of micro-credit, savings and other services to the poor that are excluded by the commercial banks for collateral and other reasons. However, there is a loan repayment problem, which discourages rural finance organizations from promoting and extending credit. The study focuses on identifying the determinants of loan repayment performance of Omo microfinance borrowers in Mizan Aman town, Bench Sheko Zone, Ethiopia. Materials and Methods: Both qualitative and quantitative data from both primary and secondary sources were used in this study. Three stage random sampling techniques were used to select 115 sample respondents. Descriptive and inferential statistics and econometric model (logit) were employed to analyze the data. Results: The binary logit model result showed that out of 115 chosen respondents, 66 were defaulters and 49 were non-defaulters. A total of 7 explanatory variables were included in the empirical model and out of the total hypothesized explanatory variables involved in the model educational level, annual income and training were positively and significantly influenced loan repayment performance of the borrowers, while loan size negatively and significantly determine loan repayment in the study area. Conclusion: The study concluded that the identified significant variables have to be a springboard for further interventions by financial institutions, stakeholders and policymakers to come up with a breakthrough to significantly decrease or even avoid defaulting problems.

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How to cite this article:

Mikir Melese and Milkessa Asfaw, 2020. Determinants of Loan Repayment Performance of Omo Microfinance Institution: In the Case of Mizan Aman Town, Southwest Ethiopia. Research Journal of Business Management, 14: 7-14.

DOI: 10.3923/rjbm.2020.7.14

URL: https://scialert.net/abstract/?doi=rjbm.2020.7.14

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