LOAN REPAYMENT PERFORMANCE OF RURAL WOMEN BORROWERS FROM OMO MICRO FINANCE INSTITUTION: THE CASE OF HAWELA TULA SUB-CITY, HAWASA CITY ADMINISTRATION, SIDAMA NATIONAL REGIONAL STATE, ETHIOPIA

In developing countries like Ethiopia microfinance institutions are playing an essential role in poverty reduction, to provide the provision of credit, saving and other services to the poor that excluded by the commercial bank collateral and other reasons. However, there is a loan repayment problem, which discourages rural financial organizations from promoting and extending credit. This study was intended to identify the determinant factors affecting loan repayment performance of rural women borrowers from OMO micro finance institution of Hawela tula sub-city administration, Hawassa city administration. The study used cross sectional survey design to carry out the study. Multi-stage sampling techniques was used to select 161 (96 defaulters and 65non-defaulter) sample women borrowers. The data were analyzed using both descriptive analysis and econometric model (Tobit model).The descriptive results of study revealed that there is a significant difference between borrower groups in terms of OMO micro finance institution contribution this are: delivery of training, engage in small scale business, better living condition, better access to basic needs, increase self confidence in public, control over financial and other resources. The tobit model result shows that family size, and borrowing repeatedly affected negatively and significantly. Whereas, income from off farm/nonfarm sources, business information, business, successfulness and training had positively and significantly influence loan repayment performance of women. The defaulters identified many problems that hinder the loan repayment process in study area this are inadequate training access given by institution, weak in following up to retrieve loans and on business, the occurrence of input price rises up from time to time (unstable market condition), natural disaster such as droughts and animal diseases, bankruptcy, perceived loan as donation/government support and consider credit as worthiness. Based on the findings, the study suggest that the identified significant variables have to be considered for further interventions by financial institutions, stakeholders and policy makers to come up with a breakthrough to significantly decrease or even avoid defaulting problems.