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Determinants of Loan Repayment of Micro and Small Enterprises in Jimma Town, Ethiopia
Language: United State
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Original United State title:
Determinants of Loan Repayment of Micro and Small Enterprises in Jimma Town, Ethiopia
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Author
Ofgaha Alemu, Jimma University, 2017
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Academic area
Economics
Abstract
The main objective of this study was to examine the determinants of loan repayment of Micro and Small Enterprises (MSEs) in Jimma town, Ethiopia. This study examined the effect of Individual characteristics, loan characteristics and firm characteristics on loan repayment of micro and small enterprises in Jimma town only. The study used descriptive research design. Primary data was collected through self administered questionnaire and it was collected from random samples of 341 Micro and Small Enterprises (MSEs) by stratifying into Five group. Secondary data were also collected from books, journals and internet. Once the relevant data was gathered, the collected data was analyzed through descriptive and inferential statistics as well as econometric model known as binary logistic regression model was used in order to examine determinants that impeding Micro and small enterprise’s loan repayment by distinguishing characteristics of MSEs. The descriptive result of analyzed data revealed that individual characteristics, loan characteristics and firm characteristics influenced loan repayment of enterprises in the study area. In addition, the result of binary logistic regression model indicated that Sex of respondents and Experience positively and significantly affect loan repayment. The inconvenience of loan payback period, Lack of financial skill and planning negatively and significantly affected loan repayment of enterprises. Lack of Marketing Skills, Follow up and supervision positively and significantly influenced loan repayment of micro and small enterprises. This study recommends that the involvement of women in ownership and management of MSE’s should be improved, the town MSEs bureau should be setting suitable payback periods by communicating and integrating with the federal government and other concerned body, Experience sharing activities on Marketing Skills should be set by bureau of MSEs with supporting institutions to acquire better knowledge and experiences from each other, Financial skill and planning should be also improved by eliminate traditional work routine by replacing qualified personnel , banks and micro finance institutions should develop means of support , take close control, continuous follow up and supervision.