Factors Affecting Loan Repayment among the Customer of Microfinance Institution: A Case of East Arsi Zone Dera Branch

This study aimed to identify and analyse the factors affecting loan repayment performance of borrowers through the use of questionnaires and interview schedules. To do this, three Microfinance Institutions (MFIs) from East Arsi Zone Dodota Woreda dera branch were selected and 209 borrowers and 6 MFI Employees were chosen from the total 2500 borrowers served. Descriptive statistics analysis was employed to estimate the model and analyse the findings. The results showed that variables such as sex, group borrower collateral, double loan, and supervision of loan utilization had a negative influence on loan repayment performance. Additionally, it was found that the extensive involvement and interference of a third party in the screening of borrowers by the lending institution was a factor in defaults. It was recommended that the lending institution should focus on group borrower collateral systems, double loans from different MFIs, loan utilization of borrowers, screening of borrowers, loan product, and technical support needs of the target borrowers, as well as better awareness creation to organize more viable borrowers, close supervision and follow-up, and strengthening internal and external weaknesses through better integration, keys, partners, and similar MFIs and stakeholders.