Determinants of Loan Repayment Status of Micro and Small Enterprises in Dilla Town, Gedeo Zone Administration

Micro and small enterprises have a vital contribution to economic development and the creation of wider employment opportunities in developing countries like Ethiopia. However, the repayment problem is an obstacle to financial institutions providing loans to micro and small entrepreneurs. Hence, these overarching challenges prompted research with the objective of examining the determinants of loan repayment status of micro and small enterprises in Dilla town, Gedeo Zone administration. In order to achieve this objective, both primary and secondary data was collected from 272 MSE loan beneficiaries in Dilla town using a stratified random sampling technique. The researcher mainly uses a quantitative research approach with an explanatory research design. The researcher used a binary logistic regression model to analyze the independent variables. The binary logistic regression results indicate that age, education, marital status, business experience, supervision and follow-up, training, loan line, loan repayment period, lending method, social ceremony participation, loan diversion and festival, are found to have statistically significant effect on loan repayment status. Therefore, borrowers should also be offered training in order to utilize their loans for productive and income-generating activities, and loan provider institutions should increase supervision and follow-up service. It would also enable lenders and policymakers to better channel efforts in order to minimize loan defaults.