Abstract:
The purpose of this study is to investigate major factors that contribute loan default in the case of
Abay bank Gondar city. To this end descriptive and explanatory research design and mixed
approach were selected for use in the study. Accordingly, primary data was collected from sample
of respondent borrowers (267 in number selected by census sampling) of Abay bank using closed
ended questionnaire. The questionnaire items were adopted from previous studies conducted on
the issue. The collected data was analyzed statistically using SPSS version 27. Both descriptive
statistics that include frequency and percentage distribution mean and standard deviation as well
as inferential statistics that involve correlation and regression were to summarize and interpret the
research data systematically. The results of data analysis indicated that loan default is relatively
high (both actual and potential) such factors like borrower (beta weight .108, significant at p=.012),
lender (beta weight .148, significant beyond p=.00) and loan characteristics (beta weight
.3significant beyond p=.00) as well as current political (beta weight .159, significant beyond
p=.00) and economic conditions (beta weight .39, significant beyond p=.00) found to have
significant contribution to it accounting 76.4% variance of loan default. Of which current
economic conditions and loan related factors were found to have more effect compared to other
factors considered in the study. Based on this findings stakeholders involved were suggested to
decrease loan default by taking appropriate measures step by step that is those measures related to
lender and loan characteristics to be taken by the bank management body and borrower related
characteristics by clients. Further research directions by including more banks and more
geographical area were also recommended.
