Factors affecting loan repayment performance of microfinance institutions: a study on mfis operating in jimma town

Abstract

This study was conducted with the aim of assess the factors that affecting loan repayment performance of MFI in Jimma town the case of three Microfinance Institutions, Eshet MFI, Oromia credit and saving Share Company and Harbu MFI. In this study, a structured questionnaire was used to collect the primary data and for qualitative study 10 in-depth interviews were held with loan officers and management of the institutions. The study analyzed the socio-demographic factors that affect the borrowers’ loan repayment performance and a sample of 390 borrowers was fixed from the three MFIs using the convenience sampling technique. The Result of the binary logistics regression analysis revealed that the level of education, loan amount and loan category have insignificant effect on the probability of the SMCP loan repayment. On the other hand age, gender, type of business and credit experience are significant determinants where age and type of business have negative relationship and gender and credit experience have positive relationship with the loan repayment probability.