Abstract:
This study was conducted with the aim of analyzing the factors that influence loan repayment
performance of revolving fund beneficiary youth groups in the case of Gondar city. Primarily data was
collected from respondents through structured questionnaire and secondary data was collected from
different literature sources. A multi-stage sampling technique was used to select respondents. Among 6
sub-cities, 3 sub-cities were selected randomly. Again, a simple random sampling technique was applied
to select three kebeles i.e. one kebele from each sub-city. At third stage, youth groups were stratified into
loan defaulter and non-loan defaulter in the sampled kebeles. Finally, a total of 108 youth groups were
selected from each stratum by a simple random sampling technique. This study was used a cross-sectional
survey method of research design and it applied both descriptive and correlation or explanatory research
approaches for the data collected through questionnaire. Both descriptive statistics and Econometric
model were employed to analysis the data. Moreover, t-test and chi-square test analyses were used to
compare defaulters and non-defaulters in terms of different explanatory variables. The descriptive
statistics result indicated that loan repayment period, group formation process, educational level, and
business experience were statistically significant at 1% significant level and sex of the group leaders and
age of the group leaders were statistically significant at 5% significance level. However, training, peer
support, market study and loan officers supervision were statistically not significant. The independent
double hurdle model result showed that the probability of loan repayment was affected negatively by sex
of the group leaders whereas it was positively affected by age of the group leader, tertiary and above
education level, group formation process, loan repayment period, training, and business experience. In
addition, the rate of loan repayment was affected negatively by sex of the group leader whereas it was
positively affected by group formation process, peer support, repayment period, training and business
experience. Loan repayment period suitability was found to significantly increase the probability and the
rate of loan repayment. Therefore, MFI better to revise the loan repayment period and scheduled the time
to collect the loan that would be suitable for selling the output of their business, so a flexible repayment
period should be designed in order to improve the existing rate of repayment.
