DETERMINANTS OF LOAN REPAYMENT PERFORMANCE OF AGRICULTURAL INPUT BORROWER SMALLHOLDER FARMERS FROM MULTI-PURPOSE COOPERATIVES: THE CASE OF DARA WOREDA, SIDAMA REGION.

ABSTRACT The use of loan has been predicted as one way of promoting technology transfer, while the use of recommended farm inputs is regarded as key to agricultural development. Loan repayment is also of paramount importance to have viable financial institutions. In Dara woreda, Sidama region, the Regional Government and Non-Governmental organizations are extending loan facilities to farming households in order to narrow the gap between the capital required and the capital that the households possess, for the improvement of agricultural technologies that would increase production and productivity. However, there is a serious loan repayment problem in the area, which discourages rural finance organizations from promoting and extending loan. Therefore, the objective of this study was to identify determinants of loan repayment performance of agricultural input borrowers from Mulitpurpose-cooperatives: the case of Dara woreda, southern part of Ethiopia. Primary data was collected through structured questionnaires, from a total of 200 sample households which were selected through multistage techniques to produce data pertaining to loan repayment performance during 2020. Secondary data was obtained from publications, seasonal and annual reports of the woreda, zonal and regional offices and Rural Development, Development Bank of Ethiopia, Micro Finance Office and other related organizations. Descriptive statistics were used to describe the socio-economic characteristics of the respondents, and the two-limit tobit model was used to analyze determinants of loan repayment performance of agricultural input borrowers from MPCs in the study area. The descriptive statistics results showed that out of total sample households 121 (60.5%) were non- defaulters and 79(39.5%) households were defaulters. The result of two-limit tobit econometric model showed that, from a total of 14 explanatory variables used in the model, five variables age of household, Experience on formal credit use , farm size, method of lending and distance of borrower from institution had statistically significant influence on the loan repayment performance of the sample households in the study area. Therefore, consideration of factors affecting loan repayment performance is vital because it provides information that would enable to undertake effective measures with the aim of improving loan repayment performance and hence helped lenders such as Multipurpose cooperatives, microfinance institution, nongovernmental organization and policy makers to have knowledge as to where and how to channel efforts to minimize loan defaults.