DETERMINANNTS OF LOAN DEFAULT OF AMHARA CREDIT AND SAVING INSTITUTION’S BORROWERS IN GONDAR TOWN

Abstract

The main problem of the poor performance of financial institutions in many developing countries is high rate of non-repayment of loan led to loan default. This study examines determinants of loan default of Amhara saving and credit institution borrowers and interprets the result by relating with related theories, empirical reviews and the regulations. In order to identify the factors causing for loan default, casual research design; quantitative research approach to base knowledge claims on pragmatic grounds; the study was also employed simple random sampling technique and considered multiple stage sampling to select 7 ACSI branches currently operating in Gondar town and also convenience sampling to select the samples of 351 respondents who acquired loan services from ACSI by using Yemane’s formula. Quantitative data type was collected from primary data source through questionnaire survey from ACSI customers. Descriptive statistics, inferential statistics and multi linear regression model were employed. The result person’s correlation revealed that Regarding the relationship of demographic, social, economic, business and institutional factors have statistically significant positively strong contributes or correlated at significance level of P<0.05 to loan default . Based on the model coefficient of determination or obtained was indicated that 84% of the variation in the measurement function can be explained by demographic, social, economic, business and institutional factors. The un standardized coefficients of Beta and Sig values for demographic, social, economic, business and institutional factors were significant which are less than 0.05 significance level. This indicates that there is significant relationship between independent and dependent variable.