Abstract:
Introduction: Credit has recognized as one of the important financial service that contributes to the
success of a business venture. Their success and performance chiefly depends on the effectiveness
of their credit management systems. The main problem of poor performance of Banks is high rate
of non-repayment of loans.
Objectives: The objectives of this study was to examine factors affecting loan repayment
performance among borrowers of ENAT Bank of Bahir Dar District.
Methods: To conduct this research the explanatory research design complemented with a cross
sectional data was employed, to achieve the objectives of the study both primary and secondary
data were collected from 11 branches selected using censes method. Regarding populations a total
of 127 individual borrowers were randomly selected as a sample from the 11 branches. Both the
descriptive statistics / SPSS software and logit model was utilized in order to identify the factors
affecting loan repayment performance of borrowers of ENAT Bank. Tables, figures and charts were
used to classify and present the major findings of the study.
Result: From a total of 129 questionnaires distributed to respondents, appropriately 122 have been
filled and returned with 94.6% response rate. The analysis of the study shows that out of the sixteen
independent variables the eleven variables such as educational level, loan diversion, purpose of
borrowing, loan type, interest rate, market availability, follow up, payback period, awareness
creation, others source of income and income from activities made a statistically significant with
the p value of less than 0.05. However, the remaining explanatory variables namely, sex, age,
marital status and dependent family size had no significant effect on the probability of being
defaulter. While comparing the effects of the significant explanatory variables incorporated in the
study, borrowers who have better educational level are more likely to be successful paid loan within
due date.
Conclusion and recommendation: Among other factors Loan diversion, interest rate, market
availability and payback period have negative relationship with loan repayment performance of the
borrowers. Therefore, it is recommended that Policy makers need to consider the problems and the
institution should give attention to continuous follow up on proper loan utilization.
