FACTORS AFFECTING ON LOAN REPAYMENT PERFORMANCE OF

THE CLIENTS FINANCED BY DASHEN BANK

IN CASE OF ADAMA MAIN BRANCH

RIFT VALLY UNIVERSITY

DEPARTMENT OF BUSINESS MANAGEMENT

A Thesis Proposal
Submitted To The Department Of Business Management, To rift vally University, In Partial
Fulfillment Of The Requirements For The Degree Of Masters Of Business Administration

By
TIZITA BEGASHAW

SUBMITTED TO MESFIN.A (PhD)

JULY 2022

Adama, Ethiopia

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Contents
1. Introduction 1
1.2. Statement of the problem 1
1.3 Research question 2
1.4. Objective of the study 2
1.5. Significance of the Study 3
1.6. Scope of the study 3
1.7. Limitations of the Study 4
1.8. Operational Definition 4
1.9. Organization of the Study 5
2. Literature Review 6
2.2. Theoretical of the study 6
2.3. Conceptual Framework 7
2.4. Relationship Lending and Credit Repayment Performance 8
2.5. Factors of loan repayment performance 10
2.5.1. High Interest Rate 11
2.6. Empirical of the study 11
2.7. Studies in other countries 11
2.8. As Studies Indicated in Ethiopia 12
3. Methodology 14
3.1 Introduction 14
3.2. The Research Design 14
3.3. Study Area and Population 14
3.4. Sources of Data 14
3.5. Data Collection Techniques 14
3.6. Method of data analysis And Interpretation 14
4. Time Schedule and Financial Budget 16
4.1. Time Schedule 16
4.2. Financial Budget 16
5. Reference 17

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1. Introduction
Banks role in the economy of any country is very significant. They play intermediation
function in that they collect money from those who have excess and lend it to others who
need it for their investment. Availing credit to borrowers is one means by which banks
contribute to the growth of economies. Lending represents the heart of the banking industry.
Loans are the dominant asset and represent 50-75 percent of the total amount at most
banks, generate the largest share of operating income and represent the banks greater risk
exposure Mac Donald and Koch,(12006). Moreover, its contribution to the growth of any
country is huge in that they are the main intermediaries between depositors and those in need
of fund for their viable projects. But most banks financial statement shows that the collections
of loans from borrowers are not satisfactory. This result a hung amounts of non-performing
loans (NBE, Annual Report, 2011). Loans taken from credit institutions vary from country to
country, region to region, sector to sector. However, credits of developing countries were found
to share one common characteristic suffer from a considerable amount of default rate (the
amount of loans not collected on current and past due loans for the reference period (Kashuliza,
A, 1993). There are many socio economic and institutional factors influencing repayment rates.
Lending institutions are faced with four major problems in the course of undertaking credit
activity, a) to ascertain what kind of risk the potential borrower is(adverse selection), b) to
make sure the borrower will utilize the loan properly once made, so that he will be repay
it(moral hazard), c) to learn how the project really did in case the borrowers declares his
inability to repay and d) to find methods to force the borrowers to repay the loan if the borrower
is reluctant to do so(enforcement) (Ghatak Maitreesh & Guinnane Timothy w., 1999).
Therefore, this study try will to paying attention to this sector of the economy by identifying the
factors affecting loan repayment performance of Dashen bank of Ethiopia in Adama branch.

1.2. Statement of the problem

Banks exist to provide financial intermediation services while at the same time endeavor to
maximize profit and shareholders' value. Lending is considered the most important function
for fund utilization of Banks as major portion of their income is earned from earned from loans
and advances (Radha, 1980).

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The bank also has done a lot in setting determinants to ensure that the loans are repaid back in
time without clashing with the clients so as to maintain the good relation between the client and
the bank (Mboya, Kevin M,2011). However, evidence has shown that, despite the efforts done
by Dashen banks in ensuring that all loans are recovered on time, a substantial amount of these
loans remain un-recovered. This problem does not only endanger the achievement of
objectives, but also threaten bank’s sustainability and efficiency. These results stimulated this
research to investigate and provide empirical evidences on the determinants of the loan
repayment in Dashen banks so that we can better understand the common reasons for poor loan
repayment and hence provide some guidelines to increase the probability of success and good
performance of lending program (in terms of repayment of the loan) carried out by the Dashen
bank of Ethiopia Adama branch.

1.3 Research question

1. What are the problems, institution faces in loan recovery?
2. What are the factors which eventually lead to poor loan repayment by clients?
3. What are the major socio-economic factors that may influence loan repayment performance of
the loan beneficiaries?
4. What are businesses and loan related factors that affect the loan repayment performance by the
clients?
5. What are the major problems and challenges faced by the loan beneficiaries in the repayment
process?

1.4. Objective of the study

The general objective of this study will to examine factors affecting repayment performance of
the clients financed by Dashen bank in Adama branch.

Specifically, the research tries to address the following objectives:

1. To analyze problems that institution face in loan recovery.

2. To assess the factors that lead to poor loan repayment by clients.
3. To identify the major socio-economic factors influencing the loan repayment performance of
the loan beneficiaries.
4. To find out the businesses and factors affecting the loan repayment performance by the cus-
tomers.

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5. To examine the major problems and challenges faced by the loan beneficiaries faces in the re-
payment process.

1.5. Significance of the Study

Dashen banks are important for poverty alleviation and creating employment opportunity espe-
cially in developing countries like Ethiopia. One of the key factors for profitability and sustain-
ability of Dashen banks is the presence of good timely loan repayment. This study provided in-
formation for a better understanding on the determinants of loan repayment from both side lender
and loan beneficiaries. The primary advantage of this study is to establish a knowledge base that
enables to make a sound decision and take corrective action. Thus, the study is important to
Dashen banks stakeholders, policymakers and the community at large. The study explores and
recommends potential areas that Dashen banks need to put more efforts when demanding loan
repayment from its clients. On other hand, policymakers also benefited in the sense that, the find-
ings will provide informed suggestions on how policy can be improved, with easy implementa-
tion. The Government also could use the findings of this research study to formulate better ap-
proach for country economy, for instance, to control inflation by setting the maximum and mini-
mum amounts for all loans that have direct impact to the economy. More the study enables the
community at large to understand the business and loan related factors that influence loan repay-
ment and hence access and benefit from the services offered by existing Dashen Banks. In addi-
tion, the information is useful for other lending institutions and stakeholders. The study also en-
ables the researchers to develop knowledge on DB loan repayment performance and to develop
more practical skills on how to do a research. The research also important for Unity University to
use for academic purposes. So that, it will act accordingly for future screening purpose.

1.6. Scope of the study

There are many factors affecting bank's efficiency and effectiveness in achieving its goal and ob-
jectives. Such as, loan management, repayment performance, cash management and so on. But
this study were try to cover the repayment aspects of DB in Adama branch and focus on the loan
related factors(for instance, loan reputation, loan size, credit monitoring, collateral, credit
term)affecting loan repayment performance of individual borrowers. More over the study will
take the sample from the employees of the bank. This is because of along with the knowledge
gap in the statement of the problem.

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1.7. Limitations of the Study
Time will be a major constraint in this study. As a result of limited time within which to com-
plete this work, the study will be carried out using a case study approach. There will be the possi-
bility that some issues regarding the topic might not come up if such issues are irregular to some
banks that will not cover in the study. This limitation will dealt with by conducting the study on
DB on Adama Branch one of the banks with diversified loan portfolio in almost all major sectors
of the economy. The study will further narrow down to some loan officers and some manage-
ment staff of the bank, from whom primary data will be obtained. This also caused a limitation
since there may be some biases regarding the information obtained. In dealing with this limita-
tion, the study will adapt objective questionnaires and interview guides for all respondents to re-
duce their personal perceptions. Again, respondents will assure of their confidentiality in order to
give information that represents the facts and figures on the ground. Accessibility to data wills
also a constraint in view of the confidentiality of information in banks. This limitation will mini-
mize by relying on published annual reports and financial statements of the bank, both in the
print and electronic media. The researcher’s association with the bank will also very helpful in
this direction. As an important measure to these limitations, time and resources will judiciously
manage to achieve the objectives of the study within the stipulate time frame for completion of
the work.

1.8. Operational Definition

Nonperforming loans - a loan whose credit quality has deteriorated and the full collection of
Principal and/or interest as per the contractual repayment terms of the loan/advances is in ques-
tion and delayed for more than 90 days (DB, 2008).
Credit risk – the risk arise as result when the borrower fail to conclude its financial contract
according to the agreement with lender.
Borrower: - the one who borrows money from the lender (Bank).
Lending: - provision of loan by one party (lender) to another party (Borrower)
Bank specific factors: - are variables that are under the control of bank management. They can
be directly/ indirectly stated in the financial statements of banks.
Macroeconomic factors: - are variables in which the bank management has no power to control
them. Rather, these variables are related with the fiscal and monetary policies of the country.

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1.9. Organization of the Study
This proposal will be organized into four chapters. The first chapter starts with presenting
background of the study, statement of the problem, research question, and objective of the study,
significance of the study, scope of the study, limitation of the study, definition of the
organizational terms and organization of the study. The second chapter focuses on theoretical
study, conceptual frame work, relationship lending and credit repayment performance, factors of
loan repayment performance, empirical of the study, studies in other countries and as study
indicated in Ethiopia. The third chapter deals with the research methodology which includes
research design, study area and population, source of data, data collection techniques, sample
size, sampling techniques and methods of data analysis and interpretation. Chapter four deals
with both time schedule and financial budget.

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 2. Literature Review

In this section the review of related literature will be presents. It starts on the theoretical
foundation of the study. Subsequently the relationship between lending and credit repayment
performance types of loan and factors of loan repayment performance will also present
respectively which is followed by empirical evidence that shows the determinants of loan
repayment performance in Ethiopia and study in other country. At the end of this chapter
conceptual framework is presented.

2.2. Theoretical of the study

This part of the paper takes a closer look on theoretical foundations and contributions on the
subject matter. A bank exist to perform a number of functions chiefly, accepting deposits and
granting credits (loans and advances) categorically provided as primary or banking functions; in
fact banking means accepting for the purpose of lending of investment of deposits of money
from the public. Granting of credit facilities by commercial banks which is the primary function
as pointed out earlier, expose them to credit risk. Credit is a device for facilitating transfer of
purchasing power from one individual or organization to another. As indicated by (Oyatoya,
1983)credit provides the basis for increased production efficiency through specialization of
functions thus bringing together in a more productive union the skilled labor force with small
financial resources and those who have substantial resources but lack entrepreneurial ability.

The link between credit and economic development has captured the attention of economists
since long (SchumpeterJ.A.,1933). With improved financial intermediation, the proportion of
financial savings that is diverted by the financial system into non-productive uses fails, and the
rate of capital accumulation increases for a given saving rate (Mensah, 1999.)He further
elaborates the importance of financial intermediation as it enhances saving mobilization by
providing a variety of safe financial instruments to savers and ensuring tangible returns on
savings. The financial sector contributes to the efficiency of the entire economy by spreading
information about expectations and allocation of resources to investors.

In more explicit analysis of the association between finance and economic development
(Shumpeter, 1933)treated the banking system and entrepreneurship as the two key enabling
agents of development. He argues that the banking system’s capacity to supply initiative and

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entrepreneurship in addition to credit creation enabled it to transfer resources from less
productive uses to more economically rewarding uses because those who control existing
resource or have claims on current wealth are not necessarily those best suited to use these
resources. The banking system credit creation equipped entrepreneurs with purchasing power
with which they were able to express overriding command over real productive resources.
Financial theorists argue that if economic units relied completely on self-finance, investment will
be constrained by the ability and willingness of each unit to save, as well as by its capacity and
readiness to invest (Mensah, 1999). In his contribution to the role of financial institutions, (Von
Piscke. J.D. 1991) admitted that even though finance is a catalyst for investment, it is also a
catalyst for poor investment, political patronage, corruption and other types of opportunism.

A credit market differs from standard markets (for goods and services) in two important respects.
First standard markets, which are the focus of classical competitive theory, involve a number of
agents who are buying and selling a homogeneous commodity. Second in standard markets, the
delivery of a commodity by a seller and payment for the commodity by a buyer occur
simultaneously. In contrast, credit received today by an individual or firm in exchange for a
promise of repayment in the future. But one person’s promise is not as good as another.

Promises are frequently broken and there may be no objective way to determine the likelihood
that promise will be kept (Jaffee Dwight, and Joseph Stiglitz, 1990). Banks in many developing
countries hold a truly alarming volume in non-performing assets. Differences between promised
and actual repayments on loans are the result of uncertainty concerning the borrower’s ability or
willingness to make the repayments when they are due which creates the risk of borrowers
default (Pischke, 1991; Vigano, 1993; Kitchen, 1989). The inapplicability of the standard
demand and supply model for credit market give rise to credit rationing phenomena. Credit
rationing as defined by (Jaffee M. Dwight1971)is the difference between the quantity of loans
demanded and loans supplied at the ruling interest rate. In this case lending institutions make use
of their own screening criteria to identify credit worthy borrowers so as to decrease the
probability of default.

2.3. Conceptual Framework

Dependent variable that guides this research is non-performing loans. Non-performing loans de-
pends on numerous of independent variables that can be grouped mainly into bank operations

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variables and customer operations variables. Variables that related to bank operations are credit
policy, credit appraisal, competition and under or over financing
Variable those are related to customer operations are moral hazards, inadequate business, finan-
cial, marketing, entrepreneurship and management skills, fund diversion and multiple loans
Poor credit appraisal; credit appraisal is an important part of determining the eligibility for loan,
and the quantity of the loan. A prospective borrower has to go through the various stages of the
credit appraisal process of the bank to assure the repayment capacity of the borrower -whether
the borrower is capable of repaying the loan and on due times. Failure to conform to this leads to
the state of Non-performing loans.

Poor banking policy; in this type of banking policy does not assure loan repayment , so these
kinds of policies lead to Non-performing loans due to the fact that banking policies especially
credit policies when they are not conducive. On the other hand, business skills like financial
management skills, Accounting and Book-keeping skills, marketing skills and entrepreneurship
skills are very important in business operation, so inadequacy skills affect loan repayments lead-
ing to non-performing loans

2.4. Relationship Lending and Credit Repayment Performance

One of the primary objectives of financial institutions is to provide financial services (credit and
saving) to people in order to release financial constraints and help alleviate poverty. Each
financial institution tries to maximize its repayment performance, whether or not it is profit
oriented (Han, 2008). High repayment rates are indeed largely associated with benefits both for
the financial institution and the borrower. They enable the financial institution to cut the interest
rate it charges to the borrowers, thus reducing the financial cost of credit and allowing more
borrowers to have access to it (Kon and Storey, 2003). Improving repayment rates might also
help reduce the dependence on subsidies of the financial institution which would improve
sustainability. It is also argued that high repayment rates reflect the adequacy of financial
institutions services to client’s needs. They limit the incidence of cross subvention across the
borrowers. Related also, repayment performance is a key variable for donors and international
funding agencies on which many financial institutions still depend for their access to funds. The
first-best level of repayment performance is a perfect (100%) on-time repayment rate (Ongena
and David, 2001). If the maximum repayment rate the financial institution can reach given its
lending methodology is lower than the targeted 100%, the financial institution will use second-
level strategies to increase its repayment performance. Such strategies include the allocation of

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larger loans to borrowers with lower default probability and attempt to reduce the delay in
repayment. The financial institution will develop incentive mechanisms so as to meet these
objectives. The main factors influencing repayment are either related to information
asymmetries, to adverse shocks affecting the borrower, or to the low performance of institutions
(Elsas and Krahnen, 2000. )

Information asymmetries arise when gaining information on the characteristics or on the

behavior of the borrower are costly for the financial institution. Information asymmetries
generate problems of adverse selection, allocation of loans to borrowers with undesirable
characteristics such as a high level of risk or inability to take advantage of the loan as well as
moral hazard the borrower may behave in an undesirable way (make little or insufficient effort to
take advantage of his loan or used it for unproductive purposes) (Lown & Morgan,
2003.)Adverse selection and moral hazard increase the proportion of borrowers who cannot
repay their loans on time. Borrowers that have enough money to reimburse their loan might also
default strategically. The cost of strategic default might indeed be low if the lending institution
has low collateral requirements and if the legal system gives little power to the financial
institution to enforce contracts. Financial institutions try to restrict the occurrence of those three
types of situations in designing appropriate credit schemes.

The theoretical foundations of relationship banking are found in the modern literature of
financial intermediation that acknowledges the special role of banks in alleviating the
informational asymmetries in the credit markets. Early works of (Brown & Zehnder 2006 )stress
the information production function of banks. Screening and monitoring procedures give an
information advantage to banks that allow them to overcome information and incentive problems
between the bank and the borrower. Therefore, the main benefit attributed to bank financing with
respect to other sources of finance is that banks help overcome problems of asymmetric
information by producing and analyzing information and by designing loan contracts that
improve borrowers' incentives. Bank financing may also entail some costs. Degryse & Cayseele
2000 develop a model of loan pricing in which firms bear search costs to find a new bank. They
show that loan rates offered by the relationship bank are higher than those offered at competing
banks, because the latter are willing to offer an interest lower than their funding cost in order to
capture the firm. The critical assumption in that model is the existence of exogenous search
costs. In the early nineties, two influential papers warned about the potential costs of bank

9
lending even when there are no exogenous costs of starting a relationship. (Elsas and Krahnen,
2000. ) Present a model in which relationships arise endogenously. A bank that lends to a firm
learns more about that borrower's characteristics than do other banks.

This generates an asymmetry of information among banks. Therefore, a distinction is made

between relationship (informed) banks and transaction (uninformed) banks. Informed lenders can
capture some rents generated by their older costumers, while the uninformed competitors face a
winner's curse problem. In a competitive world, the implication for loan pricing is increasing
interest rates with the duration of the relationship. In the model of (Kano, Uchida, Udell &
Watanabe 2006 )a firm balances the costs and benefits associated to two borrowing sources,
namely informed debt and arm's length debt. Bank debt is provided by an informed bank that
monitors the firm and exerts some control on the owner's decision to continue a project only if it
has positive net present value. However, informed bank debt generates distortions on the owner's
incentives to exert effort. In contrast, arm's length debt guarantees that the owner exerts the
optimal level of effort but lenders do not have control over the owner's continuation decision.
Rajan shows that borrowing from multiple sources is a way to restrict the bank's ability to extract
surplus. In a later contribution, (Kon & Storey 2003 )derived the optimal loan contract that
avoids the lock-in costs with a single lender: a long-term debt contract consisting in a line of
credit that the lending bank may terminate at any point in time, but if it chooses to continue
financing it should do so at ex ante specified terms. This arrangement can optimally limit the
informed lender's bargaining power without the need for multiple bank relationships.

2.5. Factors of loan repayment performance

Loans and advances constitute the primary source of income by banks. As any business
establishment a bank also seeks to maximize its profit. Since loans and advances are more
profitable than any other assets, a bank is willing to lend as much of its funds as possible. But
banks have to be careful about the safety of such advances (Radha .M, et al, 1980). Bankers
naturally try to balance the issue of maximizing profit by lending and at the same time manage
risk of loan default as it would impair profit and thereby the very capital .Thus a bank needs to
be cautious in advancing loans as there is a greater risk which follows it in a situation where the
loan is defaulted.
Generally, in developing and underdeveloped countries, the reasons for default have
multidimensional aspect. Various researchers have concluded various reasons for loan default.

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Literature categorizes determinants of loan repayment performance. The following paragraphs
were discussed about determinants of nonperforming loans.

2.5.1. High Interest Rate

Banks that charge high interest rate would comparatively face a higher default rate or non-
performing loans. Study by (Sinkey & Greenwalt 1991)on large commercial Banks in US depict
that a high interest rate charged by banks is associated with loan defaults. (Rajan & Dhal
2003)who used a panel regression analysis indicates that financial factors like cost of credit has
got significant impact on NPLs. Study by (Waweru & Kalini , 2009)on the commercial banks in
Kenya using statistical analysis indicates that high interest rate charged by the banks is one of the
internal factors that leads to incidence non-performing loans. Besides, studies by (Berger and
DeYoung, 1997, 1997), for the US; (Jimenez G. & J.Saurina.2006), for Spain; (Quagliariello,
2007), for Italy; Pain, 2003, for the UK; and (Bikker and Hu, 2002), (for 29 OECD countries)
banks profit margin exhibited by high interest rate affects occurrence of NPLs.

2.6. Empirical of the study

Loan repayment performance is affected by a number of socio-economic and institutional
factors. While some of the factors positively influence the loan repayment, the other factors are
negatively affecting the repayment rate. Regarding to the loan repayment performance of
borrowers several studies have been conducted in many countries by different authors. Some of
the studies are summarized below.

2.7. Studies in other countries

(Bhatt N. & Tang S. 2002) Studied the determinants of loan repayment in microcredit evidence
from programs in the United States. Their study showed that women has low repayment rate
because some women entrepreneur in the study might have been engaged in high risk and low
return activities. (Godquin, M. 2004) Also examined the microfinance repayment performance in
Bangladesh. His result is female borrowers did not proven to have a significant better repayment
performance. The size of loan and the age of the borrower showed the negative impact on the
repayment performance. On the contrast, (Abreham G.2002)showed in his study male borrowers
are the undermining factors for repayment.

(Zeller M.1996) Analyzed the determinants of repayment performance of credit groups in

Madagascar. His finding is groups with higher level of social cohesion have a better repayment
rate. Moreover, the programs that provide saving service to their members have a significantly

11
higher repayment rate. (Olagunju et.al. 2007)Also analyzed the determinants of repayment
decision among small holder farmers in southwestern Nigeria. The result showed that the number
of visits made by loan officers to the borrowers, higher level of education, and time of loan
disbursement would have a better repayment performance. Moreover, borrowers with lower
number of household members would meet their repayment obligation better than those with
high number of household members. And having access to business related information and
providing training to the clients are increasing the loan repayment rate of the borrowers.

2.8. As Studies Indicated in Ethiopia

(Berhanu A., 2005) Studied on the determinants of loan repayment performance of smallholder
farmers in North Gondar, Ethiopia. In order to analyze the factors that affect loan repayment, he
employed the Tobit model. A total of 17 explanatory variables were considered in the
econometric model. Out of these seven variables were found to significantly influence the
repayment performance. These were land holding size of the family, agro-ecology of the area,
total livestock holding, number of years of experience, number of contacts, sources of credit and
income from off-farm activities. The remaining variables (family size, distance between main
road and household residence, purpose of borrowing, loan amount and expenditure for social
festivals) were found to have insignificant effect on loan repayment performance of smallholder
farmers.

(Abafita 2003) Analyzed the microfinance repayment performance of Oromia credit and saving
institution in Kuyu, Ethiopia. According to his finding; sex, loan size and number of dependents
are negatively related to loan repayment. On the other hand age was found to be positive, while
age squared turned to be negative. Income from activities financed by loan, repayment period
suitability and loan supervision are positively and significantly related to loan repayment
performance. Moreover, loan diversion is significant and negatively related to loan repayment
rate. The negative sign implies that the use of diverted funds for non-income generating
purposes.

(Assefa B.A., 2002) Employed a logit model to estimate the effects of hypothesized explanatory
variables on the repayment performance of rural women credit beneficiaries in Dire Dewa,
Ethiopia. Out of the twelve variables hypothesized to influence the loan repayment performance
of borrowers, six variables were found to be statistically significant. Some of these variables are

12
farm size, annual farm revenue, celebration of social ceremonies, loan diversion, group effect
and location of borrowers from lending institution.

(Abreham G.2002) Studied on the loan repayment and its determinants in small-scale enterprise
financing in Ethiopia around Zeway area. The estimation result employing Tobit model. He is
found out other sources of income, education, and work experience related economic activities
before the loan are enhancing loan repayment. While extended loan repayment period is
influence the repayment performance negatively.

(Retta 2000) Employed probit model for loan repayment performance of women fuel wood
carriers in Addis Ababa. His finding is frequency of loan, supervision, suitability of repayment
period and other income sources are found to encourage repayment hence reduce the probability
of loan default. While educational level is negatively related to loan repayment.

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 3. Methodology
3.1 Introduction
This chapter discusses the methods used in collecting required information for the study.

3.2. The Research Design

A research design should provide relevant information that will most efficiently and effectively
address the research questions or hypotheses (Hair et al., 2007.)As can be seen from the research
problem and objective of the study is more of explanatory type. Therefore, survey research
design is appropriate for this study. Survey research is used: “to answer questions that have
been raised, to solve problems that have been posed or observed, to assess needs and set goals, to
determine whether or not specific objectives have been met, to establish baselines against which
future comparisons can be made, to analyze trends across time, and generally, to describe what
exists, in what amount, and in what context.” (Isaac & Michael, 1997)

3.3. Study Area and Population

The study will be carried out at Dashen Bank of Ethiopia Adama main branch which is located in
Adama. The total number of population in Dashen bank of Ethiopia at Adama branch is 44; this
is the target population for this study.

3.4. Sources of Data

The study will employ both primary and secondary sources. Primary data will be obtained using
interview schedules and questionnaire. In support of primary sources, Secondary data will be
collected from unpublished annual and quarterly reports, businesses and government’s annual re-
ports, DB performance reports.

3.5. Data Collection Techniques

In this research primary data will be gathered by using questionnaires, interviews and direct
observations. The secondary data will be gathered through documentary reviews.

3.6. Method of data analysis And Interpretation

In order for the research to be materialized, the researcher will make the analysis and interpreta-
tion of the findings. The data analysis will be based on qualitative and quantitative techniques.
The researcher will adapt qualitative technique so as to formulate a better understanding of the
problems while quantitative will adapt so as to present the necessary data for this study in numer-
ical. By applying these methods by the researcher, data will be presented through tables, charts,

14
percentages and interpretation followed. This allowed the researcher to summarize, organize and
present data in a meaningful way and bring clear meaning to the users.

15
4. Time Schedule and Financial Budget
4.1. Time Schedule
Activities Aug Sempt Octo Nov
2021 2021 2021 2021
Title selection 
Proposal writing 
Review of literature and preparation of questioner 

Data collection, organization and analysis 

Submission of first draft of research report 

Submission of final research reports 

4.2. Financial Budget

no List of items Unit of Quantity Unit price(in Total price(in
measurement needed birr) birr)
1 Paper pad 1 160 160
2 Pen pcs 15 5 75
3 Note book pcs 5 20 100
4 Printing cost pcs 300
5 Telephone cost 200
6 Internet service cost 200
7 Laminating cost pcs 2 8 16
8 Miscellaneous cost 200
9 Total cost 1216

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 5. Reference

Abafita 2003. (n.d.). ‘Microfinance and loan repayment performance: A Case Study of the
Oromia Credit and Savings Share Company (OCSSCO) in Kuyu’, MSc thesis, Addis
Ababa University, Addis Ababa.

Abel A, Eberly JC 2004. (n.d.). Investment, valuation and growth options,.

Abreham G.2002. (n.d.).  A ‘Loan repayment and its Determinants in Small-Scale Enterprises
Financing in Ethiopia: Case of private borrowers Around Zeway Area’, M. Sc. Thesis,
AAU.

Armendariz, A. and Morduch, J. 2010. (n.d.). The Economics of Microfinance’, (2nd ed. ed.).
The MIT Press Cambridge, Massachusetts London, England.

Aryeetey E 1995). (n.d.). . Filling the niche-informal finance in Africa, East.

Assefa B.A. (2002). Factors influencing loan repayment of rural women in Eastern Ethiopia.
Ethiopia, : the case of Dire Dawa Area’, A Thesis presented to the school of graduate
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