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