Abstract:
This study carried out on factors that determine the determinants of loan repayment
performance of the borrowers in the case of Commercial Bank of Ethiopia, Jimma District using
primary and secondary data collected through structured questionnaire. The secondary data was
collected from the individual files of hundred credit borrowers. The study used explanatory
design and qualitative research approach with a methodology of stratified and purposive. Hence
the sample population was hundred (100), of which 75 (43.8%) were successful financed
projects (non-defaulters), whereas the rest 25(14.6%) were non-successful ones (defaulters). The
variables used in the study are age, education, past credit experience, house hold size, loan
utilization, other source of income, repayment period of the loan, sector, and supervision of the
bank and timeliness of loan released. In the study Logit model was used to identify variables
which determine successful loan repayment performance. The paper reveals that education, loan
utilization, other source of income; supervision and time were statically significant determinant
of loan repayment performance of CBE’s Jimma District financed projects. However, the
analysis of the educational status of the borrowers is the most important determinant among the
ten variables. The policy implications of the study recommends that Commercial Bank of
Ethiopia, Jimma District might intensify its project monitoring and follow-up work in order to
make well-informed decisions and provide technical assistance for its credit-assisted projects;
decrease the loan processing time(disbursement or processing time) give; critically analyze the
project implementation period at the time of appraising projects and enhance its project
implementation capacity; and improve its efficacy of customer recruitment system by giving
special considerations to educational level of borrowers. Finally, the bank might look out for the
factors that significantly influence loan repayment before granting loans to the borrowers to
reduce loan defaults.
