Factors affecting loan repayment performances of micro, small and medium-sized enterprises (The case of Wolkite Town Gurage Zone South Ethiopia

Abstract

This study was aimed to examine factor affecting loan repayment performances of micro, small and medium enterprises in wolkite Town Adminstration Ethiopia. This research designed to assess enterprises related factors, lender related factors and external related factors. Both descriptive and explanatory research design were employed by using both primary and secondary sources of data. Quantitative and qualitative data would be used. Stratified simple random sampling was used to select proportional numbers of sample from each stratum in the study area. Both close and open ended questionnaire was used to collect the required data from 176 respondents. The data was collected, coded, quantified and analyzed by using statistical package for social science (SPSS v.20). The binary logistic regression model was used to show the effect and relationship between explanatory variables and explained variables. The finding of this research revealed that the selected independent variables significantly explain the variation in the dependent variable at 5% level of significance. The econometric result indicated that loan repayment period, follow up and supervision, market accessibility and enterprises services sectors and age were positively and statistically significant association with loan repayment performances of MSMEs in the study area. Whereas, factors like training, saving habit, gender, education level, marital status, enterprises member size, loan size, interest rate can affect loan repayment performances positively or negatively but their impact on loan repayment performances was insignificant. The study recommended that the town of enterprise and industry development office should be communicate and integrate with regional and federal government to create between financial institution (micro finance) and MSMEs for setting suitable loan repayment period, OMFI and other stake holder should make continuous follow up and supervision on loan utilization and repayment. The town administration should provide market linkage in around the town specially with macro project and governmental institutions, incentive like tax free for some limited time, excess land for working area, promote market and MSMSE should work hard to market demand for their product and services by preparing different market exhibition.