Association of Group, Lender, and Socio-Economic Factors with Group Loan Repayment Performance of MSE’s Manufacturing Sector: A Case Study in Dedebit Credit and Saving Institution (DECSI), Ethiopia

Abstract

This study was conducted with the objective of analyzing the association of group, lender, and socio-economic factors with group loan repayment performance of the beneficiaries of DECSI operating in the manufacturing sector as group owned MSEs. Primary data was collected from 34 selected group leaders of the group owned MSEs borrowers by using structured questionnaire and depth-interview. Chi-square test employed to analyze the association of group related factors, lender related factors, and socio-economic related factor with group loan repayment performance. The statistical test revealed that self initiation, peer pressure, suitable loan repayment period, training, and external shocks have statistically significant association with loan repayment performance of the group borrowers; whereas homogeneity, internal and regulation, loan size, and loan supervision are found to have statistically insignificant association with group loan repayment performance, though they make difference on loan repayment performance of the group borrowers. Therefore, to improve the loan repayment performance of the group borrowers, DECSI, among others, should consider the statistically significant factors while offering group loan; and should focus on the repayment challenges which are stated by the borrowers (market linkage and loan supervision), and take corrective actions. Finally, further research on similar area is suggested by considering factors that need solution such as experience of group borrowers in the sector, group size, and lack of land; besides similar study may be conducted in other sectors of the MSEs (i.e., construction, urban agriculture, and service and trade) in order to have a holistic understanding of about the determinants of group loan repayment performance.

Keywords:Chi-square, DECSI, Determinant Factors, Group Loan, Logit, Manufacturing Sector, Mekelle Microfinance, MSEs.