Determents of Loan Repayment Performance (In Case of Dire Dawa Microfinance Beneficiary)

Microfinance institutions in Ethiopia are playing an important role in poverty reduction strategies initiated by the government of Ethiopia. The mission of creating and facilitate credit and other financial schemes to enhance self-employment opportunities and poverty reduction. The main objectives of the study is identifying and analyzing the potential factors that determine repayment performance among microfinance livelihoods borrowers in Dire-Dawa administration. The study are both primary and secondary sources of data were used.. In order to achieve this objective 303 sample borrowers were selected from the total of 1250 borrowers served by those selected MFIs. The total of thirteen explanatory variables was included in the regression. The results of the descriptive statistics and binary logistic model show that sex, age, marital status, family size, livelihood type, source of income, farm size, irrigation access, business feasibility, other loan, sufficient input availability for the business, adopting new technology and enough loan to run the business were important in influencing loan repayment performance of the borrower and also significant as well as positively influence loan repayment performance of borrower. Finally the lending institutions should focus on the repayment challenges which are stated by the borrowers and take corrective actions. In order to solve the internal and external problems of the institution, the main thing might be improve the financial capacity of the institution and expand the services and upgrade the skill of loan officers in line with loan appraisal, loan monitoring and supervision.