Determinants of loan repayment of micro and small scale enterprises in alge sachi woreda

Abstract

This research aims to examine Determinants of loan repayment of micro and small enterprises in Alge sachi Woreda. The study examined the institutional management related factors (training, follow-up and supervision, repayment period), borrowers related factors (Age of leader, leader experience, keeping book of record and member size) and external related factors (market availability and infrastructures) that determine the loan repayment of small and micro enterprises. This study employed descriptive and explanatory research design. The Primary data was collected through self-administrated questionnaires from random samples of 179 Micro and Small Enterprises by stratifying into five groups. The collected data was analyzed through descriptive and inferential statistical techniques using the Statistical Package for Social Science of version 23. The descriptive statistics and binary logistic regression were employed to present the results and findings of the research. The result of binary logistic regression model indicated that Experience of respondents, Age of respondents, Training, infrastructures, follow up and supervision and loan repayment period were positively and significantly affect loan repayment. The enterprises member size, lack of keeping book of record and lack of accessible market was negatively and significantly affected loan repayment of small and micro enterprises in the study area. This study recommends that the participation of females in management of MSE’s should be improved, enterprises and industry development office should provide Capacity building trainings and should make continuous supervisions and follow-up to prepare enterprises to perform in the business they involved, an assessment of the borrowers business related experience should be conducted before loan disbursements and they should include experience in their loan criteria, Experience sharing activities on Marketing Skills should be set by office of MSEs with supporting institutions to obtain better knowledge and experiences from each other and MSE should work hard to get market access and linkages for their products and services, the MSEs should register their daily activities to control all their activities and loan,The woreda MSEs 0ffices should be setting suitable repayment periods by communicating with the federal government and other concerned body