Determinants of Successful Loan Repayment Performance In Project Financing In Case Of Development Bank Of Ethiopia Jimma District

Abstract

This study was conducted with the aim of examining determinants of loan repayment performance in project financing; in the Case of Development Bank of Ethiopia, Jimma district. The data was collected from both secondary and primary source, secondary data was collected from 100 individual borrowers, files were reviewed and Five (5) top level employees of the bank were selected through purposive sampling technique and were interviewed for primary data collection purpose. Of 100 individual borrowers, 52 were successful projects, whereas the rest 48 were defaulters. The study used both explanatory and descriptive research design with quantitative and qualitative data. The variables used in the study were , amount of loan, credit experience, educational status of borrower/manager, equity contribution ratio, project profitability, managerial experience of project manager, number of project follow-up, project implementation period delay, appraisal, due diligence and Grace period. In the study, logit model was used to identify the significant variables which determine loan repayment performance. The paper revealed that Educational status, Credit Experience, grace period, due diligence, loan amount, project follow up, credit experience and Project appraisal are statistically significant determinants of loan repayment performance of DBE’s Jimma district financed projects. Researcher suggested that equity contribution ratio of borrowers of Development Bank of Ethiopia Jimma district should be increased to make the borrowers more ethically responsible; give due attention to minimize the bureaucracy that delays project implementation period, and improve its efficacy of customer recruitment system/due diligence/ by giving special considerations to educational status of borrower/manager, managerial experience of Project managers and credit experience of borrowers among the others.