YARDSTICK INTERNATIONAL COLLEGE

DEPARTMENT OF BUSINESS ADMINISTRATION

YARDSTICK INTERNATIONAL COLLEGE
DEPARTMENT OF BUSINESS ADMINISTRATION
FACTORS AFFECTING LOAN REPAYMENT IN MICRO FINANCE INSTITUOTION IN CASE OF AWACH SAVING AND CREDIT COOPERATIVE SOCIETY
BY: - KALKIDAN TAYE
Advisor:- Dr. Mohammed Hussein
FACTORS AFFECTING LOAN REPAYMENT IN MICRO FINANCE INSTITUOTION IN CASE OF AWACH SAVING AND
CREDIT COOPERATIVE SOCIETY
Jun, 2024
ADISS ABABA, ETHIOPIA

BY: - KALKIDAN TAYE

ADVISOR:- DR. MOHAMMED HUSSEIN

JUN, 2024
ADISS ABABA, ETHIOPIA
INTRODUCTION

BACKGRAOND OF THE STUDY

STATEMENT OF THE PROBLE
OUTLINES OBJECTIVE
LITERATURE REVIEW
METHODOLOGY
DATA PRESENTATIONS AND ANALYSIS
RESULT AND DISCUSSION
CONCLUSION AND
RECOMMENDATION
 Introduction
Background of the Study
 Since in Ethiopia, poverty is the main challenge &
fundamental issue of economic development. The solution to
poverty is multifaceted as are its causes. Many argue that an
in adequate supply of credit can affect reduction negatively.
Alleviation of poverty and promotion economic development
can be facilitated through providing credit to the poor. The
formal financial sector has felid to reach the major of the
rural as well as urban poor. This has faced too poor to turn to
in formal & semi-formal financial source (Jamal 2003) The
need for micro finance is urgent & the local practice are
beginning to respond wide scale micro finance began in1990,
following the credit agreement signed between the Ethiopia
government and( IDA) International Development
Association.
 The credit program was an urban micro finance scheme that
aimed at financing the (MTDP) Market Town Development
Program whose actual celebration begun in 1994 (Mengistu,
1997). Since the implementation of microfinance law in 1996
Background of the Study
• Accordingly, to improve the living standards of the
society’s Awach microfinance was established. Most
microfinance institutions provide collateral-free small
loans to low income households. These loans are
generally expected to use for self-employment and
income-generating activities (Kono and Takahashi, 2010).
• Microfinance can be a critical element of an effective
poverty reduction strategy. Improved access and efficient
provision of saving, credit and insurance facilities in
particular can enable the poor to smooth their
consumption, manage their risks better, build their
assets gradually, develop their microenterprise, and
enhance
Their income earning capacity. Thus microfinance helps
to promote economic growth and development (ADB,
2000).
 Statement of the Problem
• Most MFIs in Ethiopia are experiencing
default problems as can be located from
their declining reimbursement costs
(Abafita, 2003). ASACCS is among the
pioneer MFIs in the use of a supplying
services in and around the capital city.
This learn about will aim at analyzing
the factor affecting loan compensation
overall performance in ASACCS.
• According to more than a few researches elements that
determine personal loan compensation universal
performance include; debtors perceived need, that is
debtors have to be given an opportunity to borrow for
their perceived needs, competence, that is the debtors
preceding non- public and earnings record, previous
prosperity, Borrowers personal persona which are
related with personal traits of the borrower inclusive of
age, sex, educational level, house hold size,
administration capacity, loan utilization, availability of
different sources of income, financial group journey
etc…. Factors which are related with the economic
group such as shape of the bank, alternate in the
lending policy, way of appraising the project, duty and
accountability of the team of people folks of the
financial group and exterior factors related with the
macroeconomic condition of the country, authority’s
insurance and herbal factors.
 Basic Research question
• What are the factors that affect the loan
repayment at ASACCS
• Which body is responsible for loan defaulter
and loan over dues awach saving and credit
sidst killo Sub branch?
• What should be measures taken to better
management of loan repayment performance
of ASACCS sidst killo sub branch?
• What are the internal and external
challenges of as ASACCS an institution?
 • Objective of the Study
• General Objective of the Study
The general objective of the study was to
find out the factors affecting loan
repayment of Awach saving and credit
institution in sadist killo sub branch
Specific Objectives
• The specific objectives of the study are:
• To assess the loaner payment performance of
Awach saving and credit institute on sidist
killo sub branch
• To identify factors affecting loaner payment of
Awach saving and credit institution sidst killo
sub branch
• To examine the required collateral to offer
loans
• To identify who is responsible for loan
defaulter and loan over due at Awach saving
and credit at sidst killo branch.
LITERATURE REVIEW
• Micro finance refers to small scale financial carrier
exceptionally credit and financial savings furnish to
humans who farm, fish, who function small
corporation or micro corporation where it ems are
produced, recycled or sold, who provide service,
who work for wages and commissions who obtain
earnings from renting out small amount of lands,
vehicles, draft animals, or equipment and tools, to
other people and groups at the locale stage of
growing counties, each rural and urban (Degefe
Duressa Micro finance is the provision of monetary
carrier to low earnings customers or individuals
and group lending inclusive of self-employed that
traditionally lack get entry to banking and
associated carrier (Ibid).
METHODOLOGY
Research Design
• As it was mention in the presiding section, the aim of this
thesis is to assess only the factors of loan repayment in
Awach saving and Credit cooperative society in sidest kilo
sub branch in Addis Ababa. The study employed
descriptive survey research method to improve the
performance of creditor’s loan repayment. Descriptive
survey design helps the study to gather data to achieve the
objective of the study by describing the situation as it is,
therefore descriptive survey design is found to be
appropriate and relevant in describing the existing
situation of improving the performance of creditors loan
repayment There for, it is important to achieve the stated
objective by considering the nature of the problem.
Accordingly, the descriptive method was mainly to assess
the factors of loan repayment in case of Awach saving and
Credit cooperative society in sidest kilo sub branch deeply.
The research was providing the answer of the question
why clients cannot repay the loan properly? And how
creditors improve loan repayment performance in Awach
• Research Methodology
 The office of the ASACCS is located in Addis Ababa sub branches.
It has ten branches around Addis Ababa, of which only one is
included in the study Awach SACCS sidest kilo Branch, this study
used both quantitative and qualitative research methods. A
descriptive and correlational research design was used in the
study.
 According to Sekaran (2001), descriptive research design is a
theory-based design method that is created by gathering,
analyzing, and presenting collected data in order to be able to
describe the characteristics of the variables, whereas correlation
research design is used to study a relationship between
dependent and independent variables because this research
enhances to show the relationship between the factors and
performance of loan repayment.
 It also allows examining the existing cause and effect
relationship between the dependent variable (performance of
performance of loan repayment) and the independent variable
(Educational degree of borrowers, demographic factors,
Economical level, loan size, Loan diverse).
•
 Data Collection
• This study mainly based on primary data originating
from a survey. But also secondary data was used in
this research.
• The source of secondary data was internet, articles,
and books and the source of primary data a
constructed structured questionnaire was developed.
• The questionnaire has open and close-ended
questions which respondents will be asked to tick the
appropriate answer.
• The questionnaires divided into various sections to
capture the critical areas spelt out in the objectives
for the study. Accepting
• The questions regarding demographic characteristics
of the respondents the issues relating to performance
of loan repayment and it was investigating through
5point liker the Scale based questions.
 Data Analysis and Interpretation
The data analysis was based on the respondent's
answers in order to make the report simple and
understandable.
Editing and coding were used to process the
data. In this study, the main data, questionnaires,
summaries were merged and used as a source of
information.
The data was analyzed using the statistical
package for social sciences (SPSS) version 20
computer software. In order to meet the research
questions and objectives, descriptive statistical
methods and frequency analyses were borrowers
to analyze the data. Finally, the study's findings
were discussed in the next chapter
▫ CONCLUSIONS
 Based on the fin ding so f the study the follow in g conclusions are made:-
 The loan repayment abilities of women better than men. Because of the study shows
more borrowers were females. So a woman’s ere assuming more responsibilities in
the domestic affairs of a household.
 The study shows that ASACCS sidest kilo branch taking legal actions against loan
defaulters are to pay additional 3% his/her loan interests for the month.
 ASACCS sidest kilo sub branch use the majority of the borrowers are medium age
and they serve the micro finance of long period of for the future
 The study shows that in the study area there is moderate loan collection
management system. This implies that the institution did manage their loan recovery
moderately loans collect on maturity date.
 Source of income, Loss of personal asset and weak supervisions and training have a
negative impact on repayment performance of borrowers.
 Educational level has positively affect performance of loan repayment access to basic
literacy services have access to more pro fi table projects or able to generate more
cash out flow of the project.
 good relationship with the staff of the institution and saving have positive impact on
performance of loan repayment they get any kinds of information this is help to use
the loan properly and repay effectively.
 Loan size, high amount of loan interest and loan diversion have negatives sign and
are significant in affecting loan repayment. Thus negative sign explained by the fact
that to exposit and extent moral hazard. It could also be linked to borrow inability to
repay a loan in a given period of time.
 Those independent variables which are loan size, demographic factor, institutional
factor, economical factor have no significant correlation, with the independent
variable performance of loan repayment in Awach micro finance.
 ▫ RECOMMENDATIONS
 The borrowers start repaying the loan with in a short period of time if they do not
pay they will be charged interest and penalty which is distort the payment system
Therefore, it is recommended it would be better for the borrowers if the institution
offers an inters – free grace period after disbursing the loan.
 Although continuous follow up and supervision is important for loan repayment,
there is not enough supervision made by loan officers. This is due to the increasing
number of clients in the institution. Therefore, it is recommended to make the
number of clients and loan officer comparable. In recent years the institution does
not give training for the clients. Thus, the institution should work more in this
regard by collaborating with different associations. And loan officers should also
give the clients the necessary orientation.
 Most of the institution customers are individual borrowers. Therefore, it is
recommended to if it is possible to make it accessible to organized association for
further service expansion
 The borrowers who save their money in the institution have good repayment
performance. Therefore, the institution should motivate the saving behavior of the
clients by using different incentives like increasing interest rate for saving and work
more on promoting their services
 Age of the borrowers is also significant determinant of loan repayment performance.
The elder borrowers have taken responsibility to repay their loan. It is not
recommended to exclude the young age groups but the institution should give
special attention to those borrowers by continuous follow up and supervision.
 The types and amount loan is considers as a factor to overcome this it is
recommended to compare loan size with the business proposal of the client before
loan disbursement and should revise the rule and regulation of the institution based
on the current economic condition of the country
 THANK YOU
FOR YOUR
ATTENTION!!!