Determinants of

Member’s Loan Repayment Performance: In Case of Awach Saving

and Credit Cooperative Society

MBA PROGRAM

A Thesis Submitted to the School of Graduate Studies of CPU College in

Partial Fulfilment of the Requirements for the Award of the Degree of
Master of Business Administration (MBA)

By: MINALEM GIRMA

Advisor: TOFIK (PhD) CANDIDATE

July 30, 2019

ADDIS ABABA, ETHIOPIA

1
 CERTIFICATE
This is to certify that the thesis entitles “Determinants of member’s loan
repayment performance In Addis Ababa: The Case of Awach saving and
credit cooperative society in Arada sub city wereda 7 branch office”,
submitted to CPU College for the award of the Degree of Master of
Business Administration (MBA) and is a record of bonafide research
work carried out by Mr. Minalem Girma under my Guidance and
supervision. Therefore, I hereby declare that no part of this thesis has
been submitted to any other university or institutions for the award of any
degree or diploma.

Signed by the Examining Committee

Adviser’s Name Date Signature

___________________ __________________ ________________

External Examiner’s Name Date Signature

_______________________ ________________ __________________

Internal Examiner’s Name Date Signature

______________________ __________________________________
MBA Coordinator Date Signature

_______________________          __________________ ___________________

i
 DECLARATION

I hereby declare that this thesis entitled “Determinants of member’s loan

repayment performance In Addis Ababa: The Case of Awach saving and
credit cooperative society in Arada sub city wereda 7 branch office”, has
beencarried out by me under the guidance and supervision ofPHD
candidate Tofik musema .The thesis is originaland has not been submitted
for the award of any degree or diploma to any university or institutions.

Researcher’s Name Date Signature

_________________________ _______________ ___________________

ii
 Acknowledgements

Let me first thanks the omnipotent God. In all ways enables me things to
become like this .also I would like to thanks Tofik musema (PhD,
candidate) extra mural for the guidance, support and consistent
instructions he gave to me to ensure that in complete this work. I also
acknowledge all my lecturers who covered all the course work required to
complete this program. My sincere thanks goes to the CPU College for
giving me the opportunity to join this program as full scholar ship award.
Finally, I would like to highly appreciate my mother, dad and my wife the
immense assistance that I received from including other people who helps
and encourages me throughout the completion of this program.

To mention a few, Abraham Zerihun, Tena gizaw and others

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 ABSTRACT

There are a lot of options to deliver financial services to the urban poor.
Cooperatives are one of the available options. Cooperative model of microfinance
institution is a cost effective model for providing financial services to those segments
of the population especially for those who suffer from loan access that have little or
no access to other formal financial services. the main purpose of this paper was to
identify determinants of members loan repayment performance in case of Awach
saving and credit cooperative society in Addis Ababa ,Arada sub city .from a target
population of 416 a total of 110 samples where addressed using simple random
sampling technique in the questionnaires. The respondents were selected through
random /lottery methods of sampling in the study area. To achieve its objectives the
paper was deployed descriptive and explanatory methods of data analysis. Empirical
study identifies three major determinant factors which affect loan repayment
performance .these are economic ,institutional and cultural factors the finding
indicate that economic factor have small significant positive correlation with loan
repayment performance and institutional factor have negative significant and small
correlation with loan repayment performance. Whereas cultural factor, have
significant negative medium correlation with loan repayment performance. In
addition to this the independent variables such as economic, institution and cultural
explain the variation of the dependent variable which is loan repayment performance
in the study area .in this regard. Institutional, economic and Cultural factors can
explain better the variation of dependent at 99%confidence interval level. Based on
the findings recommendation was forwarded for the federal cooperative agency,
Awach saving and credit cooperative society and other researcher.

Key words:Determinant, AwachSacco, LoanRepayment Performance

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 Table of Content

Content Page

CERTIFICATE...............................................................................................................i

DECLARATION...........................................................................................................ii

Acknowledgements ......................................................................................................iii

ABSTRACT .................................................................................................................iv

Table of Content.............................................................................................................v

List of Tables.................................................................................................................ix

List of Figure……………….………………………………………………………..………..x

Acronyms......................................................................................................................xi

CHAPTER ONE...........................................................................................................1

1.INTRODUCTION.....................................................................................................1

1.1 Background of the study...........................................................................................1

1.2 Statement of the problem..........................................................................................1

1.3 Research Question........................................................................................................4

1.4 objective of the study ....................................................................................................4

1.4. 1. General objective......................................................................................................4

1.4.2.Specific objectives ........................................................................................................

4

1.5. Significant of the study..................................................................................................5

1.6. Scope of the Study.........................................................................................................5

1.7. Limitations of the Study.................................................................................................5

1.8 organization to the study.................................................................................................5

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CHAPTER TWO..........................................................................................................6

REVIEW OF LITERATURE.....................................................................................6

2.1. Theoretical Perspectives................................................................................................6

2.1.1. Microfinance...........................................................................................................6

2.1.2. Meaning of micro credit..........................................................................................7

2.1.3. Types of institutions that supply microfinance services..........................................7

2.1.4. Cooperative.............................................................................................................8

2.1.4.1. Concept of cooperative........................................................................................8

2.1.4.2. Financial cooperatives........................................................................................10

2.3. Empirical Studies on Loan Repayment Performance...................................................11

2.3.1. Empirical studies in other countries......................................................................11

2.3.2 Empirical studies in Ethiopia.................................................................................15

2.4. Research gap................................................................................................................17

2.5. REVIEW of conceptual frame work .............................................................................18

2.5.1 Conceptual frame work...............................................................................................18

CHAPTER THRE......................................................................................................18

RESEARCH METODOLOGY.................................................................................18

3. Description of the study area....................................................................................18

3.1 Research Design............................................................................................................18

3.2. SamplingDesign...........................................................................................................19

3.3. Population of theStudy.................................................................................................19

3.4. Sample SizeDetermination...........................................................................................19

3.5. Sample SelectionTechnique.........................................................................................20

3.6. Source and Methods of DataCollection........................................................................20

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 3.7. Methods of Data Analysis............................................................................................21

3.8. DescriptiveAnalysis.....................................................................................................21

3.9. InferentialAnalysis...................................................................................................21

3.10. The Pearson Product Moment CorrelationCoefficient...............................................21

3.11. Multiple linear regressionAnalysis.............................................................................22

3.12. Modelspecification..........................................................................................22

3.13. Assumption for Multiple Linear RegressionsModel...............................................23

3.14. NoMulti collinearity...............................................................................................23

3.15. Independence of theresiduals.....................................................................................23

3.16. Normality...................................................................................................................24

3.17. InstrumentValidity.................................................................................................24

3.18. InstrumentReliability.................................................................................................25

3.19. EthicalConsiderations................................................................................................26

3.20. Conceptual frame work..............................................................................................26

CHAPTER FOUR......................................................................................................27

DATA ANALYSIS.....................................................................................................27

4. Introduction..............................................................................................................27

4.1 Descriptive Data Analysis.............................................................................................27

4.1.2 Personal Details of the respondents........................................................................27

4.1 Results of Measures of Central Tendency and Dispersion.........................................30

4.2.1 Loan repayment performance that determine member’s loan repayment performance
............................................................................................................................................31

4.2.2 Descriptive Statistics...........................................................................................31

4.2. 3 Institutional Factors That Determine Member’s Loan Repayment Performance...35

4.2. 4. Cultural factors that determine member’s loan repayment performance..........36

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 4.3.2.1 Correlation analysis between economic factors with Loan repayment
performance....................................................................................................................38

4.3.2.2 Correlation analysis between Institutional factors with Loan repayment

performance....................................................................................................................39

4.3.2.3 Correlation analysis between cultural factors with Loan repayment

performance..................................................................................................................39

4.3.3 Regression Analysis...............................................................................................40

4.3.3.1. Multiple linear Regressions Analysis.................................................................40

4.3.3.1.1 Multiple linear Regressions Analysis Assumption...........................................40

4.3.3.1 .2 No Multicollinearity....................................................................................40

4.3.3.1 .3 Independence of the residuals.........................................................................42

4.3.3.1.4 Normality.......................................................................................................42

4.3.3 .3 Regression Analysis of Determinant factors for the Members loan Repayment
performance....................................................................................................................44

4.3.3.3.1The Effect of Economic Factors on Members loan repayment performance.....46

4.3.3.3.2 The Effect of Institutional Factors on Members loan repayment performance.46

4.3.3 .3.3 The Effect of cultural Factors on Members loan repayment performance.......47

CHAPTER FIVE........................................................................................................48

CONCLUSIONS AND RECOMMENDATIONS...................................................48

5.Introduction...............................................................................................................48

5.1. Conclusions..................................................................................................................48

5.2. Recommendations........................................................................................................49

REFERENCE...............................................................................................................51

Appendixes …………………………………………………………………………..53

viii
 List of Tables

Table 12 the Relationship between independent variables and loan repayment

performance…………………………………………………………………………………………………………….38

Table 15 Regression Analysis of Determinant factors for the Members loan Repayment
performance……………………………………………………………………………………………………………………….44

Table 16 dependent and independent variables…………………………………………….45

Table 17 Regression analysis of the independent and dependent variable……………….45

List of Figure

Fig 1 source the researcher develop ………………………………………………26

Fig 2 .Normal probability plot (p-p)of the regression standardized residual ….…..43

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Acronyms

SACCOs Saving and credit cooperative societies

CSA Central Statistics Agency
MFI Micro finance institution
WIBS Wereda Integrated Basic Services
UNICEF UNITED NATION INTERNALTIONAL
ICA International cooperatives alliance
CFIs Cooperative financial institutions

ARDO Agricultural and Rural Development Office

AACCOA Addis Ababa city cooperative agency

x
xi
 CHAPTER ONE
1. INTRODUCTION
1.1Background of the study

As per central statistics authority (CSA) 2007 reports, Ethiopian is administratively sub –
divided in to nine regional states and two city administration .its number of population as
many of 2007 is 73,918 505 out 49.54% of them are women and 50.46% of them are
men from the total population 84% of them are live in rural area and the remaining 16%
in urban areas.

According to Addis Ababa city administration cooperative agency office loan recovery
reports there is different kinds of SACCOs which engaged in providing loan to different
members of the societies. For the last 5 years total of birr 1.5 billon has been disbursed
for members but only 75% of it is collected back. Obviously, the data shows as the
loan repayment performance is poor implying as examining repayment performance is
very crucial agendas. (AACCOA).

Thus, for securing high loan repayment rate it is crucial to thoroughly investigate various
aspects of loan defaults, and determining factors for loan repayment so that it can help
financial institutions, policy makers and other stake holders have information on the issue
and help them as a basis for intervention moves. Thus, this study was undertaken to
investigate how loan repayment is going on among members of Awach SACCO in Addis
Ababa city administration and asses its determinants.

1.2 Statement of the problem

There is a considerable emphasis on profit making (financial self sustainability) in

current microfinance practice (Drake and Rhyne, 2002). The primary objective of MFIs
is to provide financial services (credit and saving) to the poor in order to relieve
financial constraints and help alleviate poverty. Each MFI tries to maximize its

1
repayment performance, whether it is profit oriented or not. One indicator of effective
MFIs is the loan repayment performance of the borrowers (Sengupta and Aubuchon,
2008). High repayment rates are -- associated with benefits both for the MFI and the
borrowers (Godquin, 2004). If there is high repayment rate, the relationship between the
MFI and their client will be good, as Bond and Rai (2009) argues that high repayment
rate helps to obtain the next higher amount of loan and other financial services. In
contrast, if there is low repayment rate, both the borrowers and the MFI will be affected.
In this case the borrowers will not be able to obtain the next higher loan and the lender
will also lose their clients.

Loans taken from credit institutions vary from country to country, region to region,
sector to sector. But most 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
1993).

Improving repayment rates helps reduce the dependence of the MFIs on subsidies,
which would improve sustainability. It is also argued that high repayment rates reflect
the adequacy of MFIs’ services to clients’ needs (Godquin, 2004). In order to maintain
sustainability of MFIs, one important thing is to identify the socio-economic and
institutional factors which significantly affect the performance of loan repayment rates
from different perspective.

There are many socio-economic and institutional factors influencing loan repayment
rates in the MFIs. The main factors from the lender side are high-frequency of
collections, tight controls, a good management of information system, loan officer
incentives and good follow ups (Breth, 1999). In addition, the size and maturity of loan,
interest rate charged by the lender and timing of loan disbursement have also an impact
on the repayment rates (Oke, et al, 2007). The main factors from the borrower side
include socio-economic characteristics such as, gender, educational level, marital status
and household income level and peer pressure in group based schemes. Most MFIs in

2
Ethiopia are experiencing default problems as can be observed from their declining
repaymentrates(Abafita,2003).AdCSIisamongthepioneerMFIsinthecountryprovidingserv
icesinandaroundthecapitalcity,whichalsoExperiences considerable problem of default.

In Addis Ababa city administration's there is a loan repayment problem. Out of the total
finance distributed by different saving and credit cooperatives for the last five years,
almost 75 % of it is not collected back .the poor loan repayment performance seen clearly
implies as repayment problem is a core problems shared by all cooperatives engaged in
providing loan (AACoA, 2017). Mean while, providing low cost efficient credit services
and recovering a high percentage of Loans granted are the ideal aims in rural finance
(Winner, 1995). Llano et al. (1996) argue That to continue providing financial services to
the poor on a sustaining basis, the MFIs22 themselves must be viable and sustainable.
Therefore, the lenders must devise various institutional mechanisms that aimed to reduce
the risk of loandefault. If there is no repayment of loan, then there may not be sufficient
funds to ensure that the liquidity positionof the MFI is maintained. When there is a loss in
the MFI liquidity due to high levels of non-repayment, the cyclical flow of funds between
the MFI and the borrowers will be interrupted. Yaron (1994) found that the failure of a
large number of MFIs in many developing countries is due, among other things, to their
in ability to ensure good repayment rates among their borrowers. According to Arene
(1992), whether default is random and influenced by erratic behavior or whether it is
influenced by certain factors in a specific situation, there is a need for an empirical
investigation so that the findings can be used by micro financing institutions to
manipulate their credit programs better.

In identifying the loan repayment problem in Addis Ababa city administration , Although
Belay (2002)conducted a research on factors influencing loan repayment performance of
rural women in Dire Dawa area and found location of borrowers from lending institution,
loan diversion, annual farm revenue, celebration of social ceremonies, group effect and
farm size as influencing factors of loan repayment performance of women, his study was
solely on members of informal women group benefiting from the micro-credit service of
Wereda Integrated Basic Services (WIBS) which is a joint UNICEF-Government

3
development program.Through extensively reading extant literature works on the topic
area some key determinant factors Such as economic, institutional and cultural issues are
not exhaustively addressed. This is the research gap identified by this paper Thus, the
central theme of the paper is to identify determinants of members loan repayment
performance in Addis Ababa city administration in the case of Awach saving and credit
cooperative society in Arada sub city wereda 7 branch office. A detail investigation was
conducted on factors such as economic, institutional and cultural related factors.

1.3 Research Question

The study tried to answer the following research questions:

1. How economic factors affect loan repayment performance?

2. How institutional factors that affect loan repayment performance?

3. How cultural factors affect repayment performance?

4. Which one is the highest determinant factor for loan repayment performance?

1.4 Objective of the study

1.4.1. General objective

The general objective of the study is to assess the determinants of members loan
repayment performance in saving and credit cooperatives in case of Awach SACCO.

1.4.2. The specific objectives

 To examine the economic factors that determine loan repaymentof members ; and
 To examine the institutional factors that determine loan repayment of members
 To examine the cultural factors that affect repayment performance.
 To examine the highest determinant factors in determining loan repayment
performance

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1.5. Significant of the study

This study will be important to provide adequate information for cooperatives, policy
makers, cooperative promoters, development workers and stakeholders regarding to
saving and credit cooperative loan repayment determinants. It will enable them to design
appropriate policies and programs on cooperatives developments. Finally, it will be used
as a basis for further studies which will be conducted related to determinants of loan
repayment on saving and credit cooperatives.

1.6. Scope of the Study

This study was limited to Addis Ababa city administration particularly in Arada sub city
wereda 7 branch offices. And the study was focused on the determinants of member’s
loan repayment performance on Awach saving and credit cooperatives in the study area.

1.7. Limitations of the Study

This paper is focused on determinant of loan repayment performance in Awach saving

and credit cooperative society in Addis Ababa particularly in Arada sub city wereda 7
branch office. It confined with determinant factors like economic, institutional and
cultural towards Awach SACCO due to different constraints like time and money
.
This paper has also the following limitations.
 It focuses on few determinant factors of Awach saving and credit cooperative society
in Addis Ababa.
 The members and employees were not available on site or reluctant to fill
questionnaires and to respond timely.

. 1.8 organization to the study

This study is organized into five chapters. Chapter one constituted the introduction,
which focuses mainly on the background, statement of the problem, objectives, research
questions, the scope, limitations and significance of the study. Review of the theoretical
and empirical literature pertinent to the concern of the thesis is presented in Chapter two.
In the third chapter methodology of the study, target population, sample size, sources of
data and method of analysis included, Chapter four reports on results of the study along
with discussion presented. Finally, conclusion and recommendation are presented in
Chapter five.

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 CHAPTER TWO

REVIEW OF LITERATURE

2.1. Theoretical Perspectives

2.1.1. Microfinance

Microfinance is a development approach that provides financial as well as social

intermediation. The financial intermediation includes the provision of savings, credit and
insurance services, while social intermediation involves organizing citizens’ groups to
voice their aspirations and raise concerns for consideration by policy makers and develop
their self-confidence (Robinson, 2002). It is defined as the provision of financial services
to low-income clients, including consumers and the self- employed, who traditionally
lack access to banking and related services (Gonzalez-Vega, 2008). Moreover,
Marguerite (2001)stated that microfinance refers to small-scale financial services-
primarily credit and savings25provided to people who farm or fish or herd; who operate
small enterprises or microenterprises where goods are produced, recycled, repaired; who
promote services; who gain income from renting small amounts of land, draft animals, or
machinery and tools to other individuals and groups at the local level of developing
countries, both rural and urban. Microfinance is the provision of a broad range of
financial services such as deposits, loans, payment services, money transfers, and
insurance to poor and low-income households and, their micro enterprises. It can be a
critical element of an effective poverty reduction strategy. Improved access and efficient
provision of saving, credit and insurance facilities in particular can enable the poor to
smooth their consumption, manage their risks better, build their assets gradually, develop
their microenterprise, and enhance their income earning capacity. Thus microfinance
helps to promote economic growth and development (ADB, 2000).Therefore, based on
all definitions given, it can be concluded as microfinance encompasses broad financial

6
services given to the poor and low-income group for many reasonsincludingincome
generating activities.

2.1.2. Meaning of micro credit

Microcredit emphasizes the provision of credit services to low income clients, usually in
of small loans for micro enterprise and income generating activities (Sadegh,
2006).Generally, the goals of micro-credits programs according to Moazami et.al. (2005)
are:

 Increasing access coefficient of low income rural women to credit

facilities
 Considering and focus on low income rural women groups
 Empowering rural women to enjoy needed job skills
 Empowering rural women to deal with group works and cooperative
activity
 Equipping non-productive villager’s saving (women) to effective and
productive Investment
 Planning in order to perform projects that are based on capacities and
facilities of that area
 Breaking poverty cycle and saving rural family
 Developing employment and stabilizing jobs which faced financial crisis

2.1.3. Types of institutions that supply microfinance services

Microfinance services are provided by three types of sources: Formal institutions, such
asrural banks and cooperatives; Semiformal institutions, such as nongovernment
organizations; and Informal sources such as money lenders and shopkeepers. Institutional
microfinance isdefined to include microfinance services provided by both formal and
semi-formal institutions(ADB, 2000).There are different providers of microfinance (MF)
services and some of them are;nongovernmental organizations (NGOs), savings and

7
loans cooperatives, credit unions,government banks, commercial banks or non bank
financial institutions. The target group ofMFIs are self employed low income
entrepreneurs who are; traders, seamstresses, streetvendors, small farmers, hairdressers,
rickshaw drivers, artisans blacksmith etc (Ledgerwood,1999)

2.1.4. Cooperative

2.1.4.1. Concept of cooperative

Cooperation has been the very basis of human civilization. The inter-dependence and
themutual help among human beings have been the basis of social life. However, modern
type ofco-operative enterprise has its origins in the 19th century and has become one of
the mostever present example forms of business/economic enterprise.Different authors
defined cooperatives in different ways and meanings. The internationalcooperatives
alliance (ICA) defined cooperative in 1995 as an autonomous association of persons
united voluntarily to meet their common economic, social and cultural needs
andaspirations through a jointly owned and democratically controlled enterprise.The
statement is often supplemented with the distinguishing features of seven
principlesadopted by ICA. Moreover, according to the 1995 statement, cooperatives
function based onthe values self-help, self-responsibility, democracy, equality, equity and
solidarity. In of their founders, cooperative members believe in the ethical values of
honesty andopenness.Cooperatives are voluntary associations that are members owned,
self managed anddemocratically controlled within a specific location (Adedayo and
Yusuf, 2004).Cooperatives are independent association of people who voluntarily unite to
form a jointlyowned and democratically controlled enterprise called cooperatives, to meet
members’economic, social and cultural needs (Henry and Schimmel, 2011).Cooperative
is one of a range of financial arrangements designed to attract the poor as eitherborrowers
and/or savers (Montgomery and Weiss, 2005). Cooperative societies arecommunity
based, self controlled, and self funded microfinance institutions
(Simkhada,2004).Cooperative is a microfinance arrangement to help the low income
earners with financialservices that will enable them to create wealth without any

8
discrepancy as to the gender ofsuch persons. Cooperative enables low income people to
access financial and non financialservices that are packaged in a manner that enable those
who are unable to access formalfinancial services to access comparatively small loans,
saving schemes and otherservices for working capital and income generation (Nathan et
al., 2004). Cooperatives areprivately organized institutions that are owned and controlled
by their members (Branch,2004).28 Cooperative is an association of persons who have
voluntarily joined together to common end through the formation of a democratically
controlled organization, making equitablecontribution to capital required and accepting a
fair share of the risks and benefits of theundertaking in which the members actively
participate (Bezabih, 2012).The most commonly used definition is given by the
International Cooperative Alliance, theapex organization that represents cooperatives
worldwide that states a cooperative as anautonomous association of persons united
voluntarily to meet their common economic, social and cultural needs and aspirations
through a jointly owned and democratically controlledenterprise (ICA, 1995 cited in
Krishnaswami and Kulandaiswamy, 2000: 43).The above definition emphasizes that
cooperatives are independent of government and notowned by anyone other than the
members. They are associations of persons, which can meanindividual people but also
‘legal persons’, organizations that may themselves have members.This means that federal
bodies whose members are primary cooperatives can also becooperatives, and that small
businesses can also be members of their own cooperatives. Theyare united voluntarily,
and should be free to join or leave. This means that collective farms or village or
neighbourhood associations that include all people in an area (whether or not they want to
be members) are not genuine cooperatives. They are designed to meet their ownneeds as
defined by the members; organizations that are set up primarily to meet the needs of
others are not cooperatives.The principles on which they are based reinforce this
definition. Cooperatives have voluntary and open membership, democratic member
control, and economic participation on the basis of membership rather than size of
investment, autonomy and independence. Because they aremember-owned businesses
they need to make a commitment to the education and training of

9
Their members, and because they are share similar values are expected to cooperate with
each other. Finally, though they exist primarily for the benefit of their members, they also
have responsibility for their wider community (Johnston, 2003).29 the diversity and types
of cooperative can be confusing, and so here is a simple way ofclassifying them. Apart
from the investors of capital, there are three main stakeholders in a business: its
consumers, the producers who supply inputs to or take the outputs from thebusiness, and
its employees. In a cooperative, usually one of these stakeholders is put at theCentre of
the business. This gives us three classes: consumer cooperatives, producercooperatives
and worker cooperatives. There is one interesting complication. Financialcooperatives ;
cooperative banks, insurance societies and credit unions often have inmembership people
who are consumers of their products and in their own right producers. Sofarmers and
small businesses can be members alongside private individuals. As long as theinterests of
each group do not conflict, the cooperative works well. There are two kinds
ofcomparative advantage to cooperatives: general ones derived from the nature of
cooperativesas member-owned businesses, and particular ones derived from specific
types of cooperative(ILO, 2009).

2.1.4.2. Financial cooperatives

Cooperative financial institutions (CFIs), albeit highly pervasive in most countries, are
amongthe poorly understood entities that comprise the existing institutional base for
financialintermediation. CFIs include diverse member-owned financial intermediaries’
referred to ascredit unions, savings and credit cooperatives, cooperative banks, and other
terms that differacross regions of the world. Their institutional structure and governance,
legal and regulatory status, and scale and services portfolio also vary widely across
regions and especially between industrialized countries and developing economies. A
most basic common denominator is that they collect deposits and do business often solely
with members. Existing literature already supports the notion that CFIs serve many poor
people, even though middle-income clients are also among their membership, a feature
that in fact allows CFIs to reach poor segments of the population without necessarily

10
compromising their sustainability. In many cases CFIs serve larger numbers of poor
people than specialized (“targeted-to-the-poor”) microfinance institutions, without
relying on donor support as the latter do (World Bank, 2006). 30

A Savings and Credit Co-operative society is a Co-operative Society, whose objective is

toencourage its members to save, thereby creating or accumulating capital, which is then
onlend to the members at a reasonable rate of interest. The loans are given for
providentpurposes, i.e. to provide for social needs such as buying clothes, radio, paying
school fees,and wedding gifts. Loans are also given for productive purposes, this in effect
are loans foreconomic development, for instance, a loan to buy a tractor, a cow, a plot or
a house (Daniel& Josephine 2013).A Saving and Credit Co-operative society accords
members an opportunity for savingregularly, accumulating the savings and thereby
creating a pool from which they can borrow exclusively for productive purposes at fair
and reasonable rates of interest than would be obtained in other financial Institutions
(Ouma,1989).

2.3. Empirical Studies on Loan Repayment Performance

Loan repayment performance is affected by a number of socio-economic and

institutionalfactors. While some of the factors positively influence the loan repayment,
the other factorsare negatively affecting the repayment rate. Regarding to the loan
repayment performance of borrowers several studies have been conducted in many
countries by different authors. Someof the studies are summarized below:

2.3.1. Empirical studies in other countries

Arene (1992) outlines the main factors that determine loan repayment performance as
loan size, enterprise size, income, age, number of years of business experience, distance
between home and source of loan, education, household size, adoption of innovations,
and credit needs. Balogun and Alimi (1988) identified the major causes of loan default as
loan shortages, delay in time of loan delivery, poor supervision, non profitability of farm

11
enterprises and undue government intervention with the operations of government
sponsored programs Bhatt and Tang (2002) conducted a study to investigate the
determinants of loan repayments in microcredit programmes that applied the group
lending approach, but took a different approach. Bhatt and Tang looked at the borrower’s
socio economic variables instead of the elements of group lending for their influence on
loan repayment behaviour. The borrower’s socio-economic variables included gender,
educational level, household income and characteristics of the business (type of business,
years in business, etc.). In their study, they found that a higher education level was
significant and positively related to better repayment performance. Conversely, female
borrowers, level of household income, type of business and borrower’s experience had
no significant effect on repayment behaviour. Chaudhary and Ishafq (2003) examined the
credit worthiness of 224 rural borrowers in Pakistan. Using logistic regression, they
found that borrowers with higher educational levels, involved in a non-farm business
activity, who were using the loans for investment and were female, had a higher
probability of repaying their loan. The study found that the subsidized interest rate level
did not have a significant effect on repayment behaviour among rural borrowers in
Pakistan. They concluded that a subsidized interest rate was not the best way to ensure
good repayment by borrowers.Chirwa (1997) estimated the probability of agricultural
credit repayment utilizing data from five Agricultural Development Divisions in Malawi
using a probit analysis. The result based 29 on 1237 sample farmer club members showed
that the availability of resources from crop sales and income transfers, the size of the
club, the degree of diversification and the quality of information determined the
probability of repayment. In contrast, other factors such as 35 amount of loan, sex of
household’s head, size of household and club experience was not statistically significant.
Crop sales, income transfers, degree of diversification and quality of information are
positively while size of club is negatively related with the probability of repayment.Eze
and Ibekwe (2007) examined the determinants of loan repayment under the indigenous
financial system in Southeast Nigeria. It was discovered that, an amount of loan received,
age of beneficiary, householder size, years of formal education and occupation were
some of the significant predictors of loan repayment under the system.

12
Gerald and Deogratius (2013) examined the credit rationing and loan repayment
performance victoria savings and credit cooperative society in Tanzania. The study found
that business management skills, alternative source of income, unfavourable weather
conditions, house hold size, late loan delivery, distance between the SACCOS and the
member’s project, number of years of project runs, experience, age, credit rationing and
loan diversion influenced loan repayment performance.

Godquin (2004) examined the microfinance repayment performance in Bangladesh. His

result shows as the correlation between gender and repayment is positive but not
significant after controlling for a number of MFI-specific effects. Goetz and Gupta
(1996) suggest that women may have a higher incentive than men for loan repayment
since it allows them to retain access to village groups, whereas men have many more
opportunities for social contact. Hulme and Mosley (1996) argue that the important
factors contribute to loan repayment performance are the design features of the loan.
They categorize the design features into three categories namely access methods,
screening methods and incentive to repay. Access methods generally ensure that poor
people access the loans not the richer people and the features include maximum loan
ceilings and high interest rate. Screening methods are used to screen out bad
borrowers.36

Kohansal and Mansoori (2009) investigated the factors affecting loan repayment
performance of farmers in Khorasan-Razavi Province of Iran. Results from a logistic
model showed that loan interest rate was the most important factor affecting repayment
of agricultural loans. The study also discovered farming experience, and total application
cost as other crucial factors. Mashatola and Darroch (2003) analyzed the factors affecting
the loan status and repayment scheme of sugarcane farmers who received graduated
mortgage loan in Kwazulu-Natal, South Africa. The results identified explanatory
variables such as farm size, access to off-farm income, and average annual gross turnover
relative to loan size as criteria in selecting potential farmers for such scheme since those

13
variables were capable of making such farmers liquid to fund future operations and debt
repayment.

Mohammad and Hooman (2009) evaluated the factors influencing on repayment

performance of farmers in Khorasan-Razavi province of Iran. The logit model was used
to analysethe data. Results showed that farmer’s experience, income, received loan size
and collateral value have positive effect while loan interest rate, total application costs
and number of installment implies a negative effect on repayment performance of
recipients. Elasticity’s of significant variables indicated that loan interest rate is the most
important factor in our model. Farming experience and total application costs are the next
factors respectively. Okorie (1986) studied the repayment behaviour in one agricultural
corporation in Nigeria. The author’s results from interviews with borrowers showed that
the nature of the loan, either cash or in kind (seeds, fertilizer and equipment) can
influence the borrowers’ repayment behaviour. He found that borrowers who received a
loan in kind had higher repayment rates than borrowers who received a cash loan. This
was because many borrowers misused the cash, diverting it into personal consumption
instead of investing in making their businessproductive. Regular visits by the loan officer
to the borrowers’ business site and higher profitsgenerated by the borrowers also
contributed to higher repayments by borrowers. Overall, the37loan repayment
performance can be influenced by three factors: borrower characteristics,business
characteristics and loan characteristics.Oladeebo and Oladeebo (2008) in their study
examined the determinants of loan repaymentamong smallholder farmers in Ogbomoso
Agricultural zone, Nigeria. The outcome of a multiple regression analysis indicated that
amount of loan obtained by farmers, years of farming experience with credit, level of
education, were major factors that positively and significantly influenced loan repayment.
Roslan and Abdikarim (2009) investigated microcredit loan repayment behaviour in
Malaysia. They conducted a study on microcredit loan borrowers from Agro Bank
Malaysia. Agro Bank is a commercial institution specializing in loans to borrowers
involved in agricultural business. Apart from giving large-scale loans, it also provides
small-scale loans, such as microcredit loans, to borrowers. In their research, they found

14
that male borrowers and borrowers who had a longer duration for repayments had a
higher probability of defaulting. Borrowers involved in non-production oriented business
activities such as in the service or the support sectors who had training in their particular
business and who borrowed higher loans had lower probabilities of defaulting.Von
Pischke (1980), some of the impacts generally associated with default include theinability
to recycle funds to other borrowers, detriment of other financial intermediaries from
serving the needs of farmers and the creation of distrust.

2.3.2 Empirical studies in Ethiopia

Abebe (2011) examined determinants of credit repayment and fertilizer use by members
ofcooperatives in Ada district, Oromia Region, Ethiopia. Tobit model was employed to
identify factors influencing loan repayment performance of the households. The result of
the model showed that family size, livestock ownership, on-farm income, non-farm
income and saving 38 habit were the statistically significant factors influencing timely
loan repayment performance positively. Abreham (2002) studied on the loan repayment
and its determinants in small-scale enterprise financing in Ethiopia around Zeway area. In
an attempt to analyze the determinants of loan repayment status of borrowers and to
identify the criteria employed to ration credit he used two equations; loan repayment and
rationing equations. The estimation result employing tobit model reveals that having
other source of income, education, work experience in related economic activity before
the loan and engaging on economic activities other than agriculture are enhancing while
loan diversion, being male borrower and giving extended loan repayment period are
undermining factors of the loan recovery performance of projects. With regards to the
loan rationing mechanism, he found that borrowers who secured high value of collateral

and those with relatively longer repayment period were favoured although they tend to be
more risky while those with higher equity share and extensive experience in related
activity were disfavoured. Amare (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 a tobit model. A total of 17 explanatory

15
variables were considered in the econometric model. Out of these variables, seven of
them were found to have statistically significant influence on the loan repayment
performance of the sample households. 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 fromoff-farm activities. The remaining
variables (family size, distance between main road andhousehold residence, purpose of
borrowing, loan amount and expenditure for social festivals) were found to have
insignificant effect on loan repayment performance of smallholder farmers. Bekele et al.
(2005) studied the socio-economic factors influencing repayment of agricultural input
loan in Ethiopia using a logit model. The result of the model showed that total livestock
39 holding, the amount of loan taken by households, off farm income by member of the
household, yield loss, grain production and timeliness of input supply, were became
significant variables. Brehanu and Fufa (2008) employed probit and logit regression to
study the determinants of loan repayment rates for agricultural loans among small-scale
farmers in Ethiopia. In the study, they found that borrowers with larger farms, higher
numbers of livestock and farms located in a rainfall area had a higher capacity to repay
loans, since all those factors increased the farmers’ productivity and income. The study
also found that borrowers who had extra business income and were experienced in using
agricultural technology had a good repayment performance.Belay (2002) employed a
logit model to estimate the effects of hypothesized explanatoryvariables on the repayment
performance of rural women credit beneficiaries in Dire Dawa,Ethiopia. Out of the
twelve variables hypothesized to influence the loan repaymentperformance of borrowers,
six variables were found to be statistically significant. Some ofthese variables are farm
size, annual farm revenue, celebration of social ceremonies, loan diversion, group effect
and location of borrowers from lending institution.Gebrehiwot (2006) employed logit
regression model in his research and showed that fivevariables were significant to affect
borrowers’ loan repayment performance. These variables include: educational status of
the sample household, family size of the household, duration of cooperative membership
of the household, total size and use of land holding of the household and amount of
money borrowed by the household. Except the size of land holding, all the significant

16
explanatory variables affect the loan repayment performance smallholders positively.
Jemal (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 dependants are negatively related to loan repayment. On the other hand age was found
to be 40 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. Million et al. (2012)
studied factors affecting loan repayment performance of smallholder farmers in east
hararghe zone, Oromia, Ethiopia using a tobit model. The result of the modelshowed that
agro- ecological zone, off-farm activity, production loss, informal credit,celebration of
social ceremonies, number of contact days of the farm household head withextension
agents and loan income ratio, determined repayment performance.Retta (2000), cited in
Jemal (2003) employed probit model for loan repayment performance of women fuel
wood carriers in Addis Ababa, Ethiopia. In his finding, 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.

2.4. Research gap

As mentioned above, various studies were conducted on the determinants of loan

repayment performance in different countries. Most of these studies were focused on the
credit associated with agricultural activities and they identified the socio-economic
factors that affect the loan repayment rate of rural household. However, in the literature
review in somehow extent tried to indicate about factor influencing the loan repayment
performance of borrowers ,thus this research could focus on detail investigation was
conducted on factors such as economic , institutional and cultural related factors in the
study area.

17
2.5 Review of Conceptual Framework

The main objective of the study is to identify determinant of loan repayment performance
in Awach SACCO in Addis Ababa particularly in Arada sub city wereda 7 branch office.
Hence loan repayment performance is a dependent variable. It can be measured by
different factors. I have paid the loan on the due date; credit repayment period was
adequate and regular visited by loan officers.
To match the conceptual framework with the objective of the study economic,
institutional and cultural related factors are independent variables.

The relationship between independent and dependent variable can be expressed in the
following way:

2.5.1. Conceptual frame work

ECONOMIC FACTORS
LOAN REPAYENENT
PERFORMANCE
INSTUTUTIONAL FACTORS

CULTURAL FACTORS

Fig 1source the researcher develop

18
 CHAPTER THREE

RESEARCH METODOLOGY
3. Description of the study area

This study was conducted on saving and credit cooperative society which is found in
Addis Ababa city administration particularly on Arada sub city wereda 7 . It was select
due to the fact that Awach is one of the best saving and credit cooperative society
among others which is found in Addis Ababa city administration.

3.1 Research Design

According to Cooper, Schindler & Sharma (2012) research design is the plan and
structure of investigation so conceived as to obtain answers to research questions
(p.159). “A research design is the arrangement of conditions for collection and analysis
of data in a manner that aims to combine relevance to the research purpose with
economy in procedure.”(Khotari, 2004:31) He also groups research designs in to the
following categories: (1) research design in case of exploratory research studies (2)
research design in case of descriptive(concerned with describing the characteristics of a
particular individual and diagnostic research studies, and (3) research design in case of
hypothesis-testing research studies(p.35-37). Thus the study will used a descriptive and
explanatory research design. Descriptive design is concerned with specific predictions,
with narration of facts and characteristics concerning individual, group or situation
(p.36).Then thestudywillhelpindescribingthedeterminantof members loan repayment
performance inAddisAbabaparticularlyon Arada sub city wereda 7 only as one branch
from the rest which is found in different sub city. The study also employs explanatory
in that the relation between variables is correlated with an aim of estimating the

19
integrated determinates of members loan repayment performance.

20
3.2. Sampling Design
AccordingtoKothari(2004)populationisconstituteallitemsinanyfieldofinquiry.Itisthetarge
t population to be studied (p.55). By the same author census and sampling are
commonly used to conduct a research. For the purpose of this research sample
surveyused.

3.3. Population of theStudy

In this study the target population is Awach saving and credit cooperatives society Arada
sub city wereda 7 branch, despite of other braches which is found in Addis Ababa
administration in different sub city, According to Awach SACCO head of there are a total
of 400 individual members .The study focuses in Arada sub-city wereda 7 because the
sub city has the second largest concentration of individual members .

3.4. Sample SizeDetermination

A sample design is a definite plan for obtaining a sample from a given population. It
refers to the technique or the procedure the researcher would adopt in selecting items for
the sample (Kothari, 2004:55). There are two types of sampling design.
Probability/random sampling and non- probability/purposive/ judgmental sampling
(Yalew, 2011, p.120, Kothari, 2004, p.58). Because
ofinabilitytoprovideequalchancesforthetargetpopulationnonprobabilitysamplingisnotused
in this research. Instead, in probability /random sampling the target population have equal
chance to be included in the sample. Therefore, the researcher utilized random sampling
techniques. The target populations of the study are 900 individual members (Awach
SACCO , 2010). In sample size determination the researcher used Slovin’s
samplingformula.
n=N

( 1+N(e2))

Where; n=sample size

E=level of

21
 precision
i.e. 0.075
N= target
population
Hence,
n=400/(1+400
(.075*.075)
n=123

3.5. Sample SelectionTechnique

The sample size is already determined which is 123. The sample design is probability
sampling, random sampling.Therefore, according to the above formula individual
members was taken as a sample. Through lottery method the data was collected and
ready to be analyzed by using SPSS.

3.6. Source and Methods of DataCollection

AccordingtoKothari(2004:95)therearetwotypesofdataviz.,primaryandsecondary
(p.95).The primary data are those which are collected afresh and for the first time, and
thus happen to be original in character. The secondary data, on the other hand, are those
which have already been collected by someone else and which have already been passed
through the statistical process. Therefore in this research both primary and secondary
types of data wereused.
A. Primary Datasources

The primary data was collected through questionnaires. A set of close ended and
semistructuredquestionnaireindeterminantsfactorsofAwach saving and credit cooperative
wereused.Thequestionnaires were Liker type.

B. Secondary Datasources

22
Pamphlets,officialmanuals,circularsandpolicypaperswereused.Also,journals,websites,boo
ks, newsletters, reports and other related references were used as secondary source ofdata

3.7. Methods of Data Analysis

Thecollecteddatawasanalyzedthroughdescriptivestatisticalanalysis(mean,standarddeviatio
n) and inferential analysis (Multiple linear regressions analysis andcorrelation).

3.8. DescriptiveAnalysis

Descriptive analysis was used to reduce the data in to a summary format by tabulation
were used to describe the general characteristics of individual members. The reason for
using descriptive statistics was to compare the different factors.

3.9. InferentialAnalysis

AccordingtoKothari(2004)thepurposeofinferentialapproachtoresearchistoformadatabase
from which to infer characteristics or relationships of population (p.5). It allows to infer
fromthedatathroughanalysistherelationshipbetweentwoormorevariablesandhowseveralind
ependent variables might explain the variance in a dependent variable. The following
inferential statistical methods were used in this study.

3.10.The Pearson Product Moment CorrelationCoefficient

Correlationanalysisisusedtodescribethestrengthanddirectionofthelinearrelationshipbetwee
n two variables (Pallant, 2010, p.128) In this paper person’s product movement
correlation is used whether there is significant relation between the independent variables
namely economic factors ,institutional and cultural factors towardstheproductsAWach
saving and credit cooperative society in dependent variables ,loan repayment
performance. The Pearson coefficient r ranges from -1 up to 1. -1
showsperfectlynegativerelationship,0shownorelationshipand1perfectlypositiverelationshi
p (Yalew, 2004,p.328).

23
  For value 0.00-0.19 no relation or very small correlation
 For value 0.20-0.39 small correlation
 For value 0.4-0.59 medium correlation
 For value 0.60-0.79 large correlation
 For value 0.80 -1 very large or very strong correlation
(Yalew, 2004, p.328).

3.11. Multiple linear regression Analysis

Multiple regression is not just one technique but a family of techniques that
can be used to explore the relationship between one continuous dependent variable
and a number of independent variables or predictors (usually continuous). Multiple
regression is based on correlation, but allows a more sophisticated exploration of the
interrelation ship among a set of variables. It can tell us show well asset of variables is
able to predict a particular outcome.(Pallant, 2010, p.148) This method is used to
determine if the independent variables will explain the variance in dependent variable.

3.12. Modelspecification

Multiple regression analysis is a technique used for estimating the unknown value of a
dependent variable from the known value of two or more than two variables (independent
variables).(Singh and Masku, 2013, p.16). The general Multiple Regression model is
found in many literature is specified as:

Y =β0 + βiXi+e

y = β0 + β1x1+ β2x2+ β3x3 +e

Therefore, the estimated equation in the analysis of the determinants of growth in this
study is explained presented as follows and variablesare explained here under

Loan repayment performance = β0 (constant) + β1 (economic factors) + β2 (institutional

factors) + β3 (cultural factors) +e

24
Xi= explanatory variable

β0= parameter to be estimated (constant)

βi= the unknown parameters to be estimated (coefficient )

e =error term.“SPSS” would be employed to run the analysis!

3.13. Assumption for Multiple Linear RegressionsModel

The assumption of multiple linear regression models is similar with simple linear
regression model. It makes a number of assumptions about the data, and it is not all that
forgiving if they are violated. (Pallant,2010, p.150)

3.14. NoMulticollinearity

In multiple linear regression models the predictor variable or the independent variables
are not highly correlated among themselves .This is called non multicollinearity which is
basic assumption of multiple linear regression (Aarwal,2015, p.232). Multicollinearity
has a damaging effect. The regression estimate coefficient can fluctuate widely sample to
sample. Multicollinearity was checkedbyVarianceInflationFactor(VIF)–The VIF so f thel
in earregressionindicatethedegree that the variances in the regression estimates are
increased due to multicollinearity. VIF values higher than 10 indicate that
multicollinearity is a problem. This assumption also meet in thisdata.

3.15. Independence of theresiduals

It is basically the same as saying that individual data points to be independent from one
another (or uncorrelated). This assumption was checked by using Durbin-Watson
statistic. This statistic can vary from 0 to 4. For the assumption to be met, the value shall
be close to 2. Therefore, this assumption has been met.

25
3.16. Normality

Multiple regressions assume that the residuals are normally distributed. The multiple
linear regression analysis requires that the errors between observed and predicted values
(i.e., the residuals of the regression) should be normally distributed.
The variance and standard deviation of the dependent variable are equal for each
combination of values of independent variable. The magnitude of error of variance,
measure the closeness of observed values of dependent variable to the regression line
(line of ‘best fit’). The smaller the value of (also called residual variance), the better the
predicted value of the dependent variable. The random error e is a random variable with
zero expected (or mean) value (Cooper, Schindler &Sharma,2012,p.673-
675).Thisassumptionwascheckedbylookingatahistogramornormality plot.

3.17. InstrumentValidity

According to Yalew (2004) Validity can be defined as the accuracy and meaningfulness
of the inferences which are based on the data results. He adds that the validity depends on
the quality of the measurements (p. 224). Questionnaires was tested on potential
respondents to make the data collecting instruments objective ,relevant ,suitable to the
problemandreliable as recommended by the advisor .Issues raised by respondents were
corrected and questionnaireswererefinedinthepilot test. Besides, proper detection by an
advisor was also taken to ensure validity of the instruments. Finally, the improved
version of the questionnaires were printed, duplicated and
dispatched.Theinstrumentsselectedcanhelptoshowfactorsthatdeterminants of members
loan repayment performance .It addressed how these factors determine members loan
repayment performance in awach saving and credit cooperative society in Addis Ababa
arada sub-city wereda seven branch only.The structured questionnaires can also validate
the measurement. Moreover, to have valid conclusion, inferential statistical model was
used to test the relationship betweenthevariables

26
3.18. InstrumentReliability
The reliability of instruments measures the consistency of instruments(Yallew, 2004,
p.196) The reliability of as cale indicates how free it is from randomerror
(Pallant,2010,p.7)Themostcommonly used statistic for internal consistency is
Cronbach’s coefficient alpha This statistic provides an indication of the average
correlation among all of the items that make up the scale. Values range from 0 to 1, with
higher values indicating greater reliability. ( Pallant,2010, p.7),(Yalew, 2004, p.214).
While different levels of reliability are required, depending on the nature and purpose of
thescale,bycitingNunnally(1978)Pallant(2010,p.7)recommendsaminimumlevelof0.7.Als
o Yalew(2004) adds that it is good cronbach alpha not to be below0.65(p.221).

Therefor all the independent variables or factor undergone in this paper are tested by
using Cronbach’s alpha. The result was calculated by using SPSS version 24.

Table 1 Cronbach’salpha value of all Determinant factors

Factors N Items Cronbach’s alpha

Loan repayment performance 3 0.929

Economic related factors 9 0.725

Institutional related factors 8 0.923
Cultural related factors 5 0.912

Source: Field survey, 2018

27
 As table 1 shows all factors Cronbach’s alpha results were displayed. Above 0.7 was
loan repayment performance, institutional and cultural related factors had 0.929,0.923
and 0.912 Cronbach’s alpha results respectively, which is very excellent. Whereas
Economic related factor is not bad at all but it is less than 0.7 it gives a chance to say
something approximately.

3.19. EthicalConsiderations

Before the distribution of questionnaire and conducting the research both participants
and the Arada sub-city wereda seven branche saving and credit cooperative society
office and for the head office of saving and credit cooperative society have been
requestedandpermissionwasgranted.Questionnairesweredeliveredwith full consent and
knowingly of the purpose of the research. Regarding the right to privacy of the
respondents, the study maintained the confidentiality of the identity of each participant.
In all cases, names are kept confidential thus collective names like ‘respondents’ were
used.

CHAPTER FOUR

DATA ANALYSIS

4. Introduction
In this chapter the collected data were analysed and presented. The objective of the study
was to identify determinants of members loan repayment performance in Awach saving
and credit cooperative society. The descriptive analysis were held before and followed by

28
the inferential statistics analysis. Data were collected from members of AWach SACCO.
110 questionnaires were distributed for Awach SACOO members. Of which 110
questionnaires were returned. The response rate is 100% which is high. Therefore, the
researcher proceeds for analysis.

4.1 Descriptive Data Analysis

4.1.2 Personal Details of the respondents

Table 2sex of respondents

Frequency Percent Valid Percent Cumulative

Percent
Male 63 57.3 57.3 57.3
.Valid Female 47 42.7 42.7 100.0
Total 110 100.0 100.0
Source: field survey, 2018
Table 2 shows the composition of sex of the respondents. 63(57.3%) of the respondent
were male. While the remaining 47(42.7%) of the respondents were female. This
showsthat the above percents of male and female members of Awach SACCO were
participated in this study.

29
Table 3Age of respondents

Frequency Percent Valid Percent Cumulative

Percent
18-25 20 18.2 18.2 18.2
26-35 44 40.0 40.0 58.2
Valid 36-55 42 38.2 38.2 96.4
above 56 4 3.6 3.6 100.0
Total 110 100.0 100.0
Source: field survey 2018

Table 3 shows the age composition of the respondents. According to the table 44(40%) of
the respondents were between age category of 26-35. Following this the second highest
was 42(38.2%) of the respondents were in the age category of 36-55. 20(18.2%) of the
respondents were in age category of 18-25. While the remaining the smallest size was in
the age category of above 56 which accounts 4(3.6%) of the respondents. therefore the
majority of a respondent were youths which implies that their contribution was taken
high part in this study.
Table 4 level of education of the respondents

Frequency Percent Valid Percent Cumulative

Percent

primary school completed 3 2.7 2.7 2.7

junior completed 6 5.5 5.5 8.2

secondary school
3 2.7 2.7 10.9
Valid completed
Certificate 7 6.4 6.4 17.3
Diploma 28 25.5 25.5 42.7
degree and above 63 57.3 57.3 100.0
Total 110 100.0 100.0
Source: field survey, 2018

30
In table 4 the level of education of the respondents were presented. According to the table
the majority of the respondents 63(57.3%) of the respondents were degree and above
holders. Following this 28(25.5%) of the respondents were diploma holders. While
7(6.4%)of the respondent were certificate 6(5.5%)of the respondents were junior
completed the other 3(2.7%) of the respondent were primary and secondary school
completed with the same score.

Table 5 Marital status of the respondent

Frequency Percent Valid Percent Cumulative Percent

Married 56 50.9 50.9 50.9
Single 49 44.5 44.5 95.5
Valid
Divorced 5 4.5 4.5 100.0
Total 110 100.0 100.0
Source: field survey, 2018

In table 5 the marital status of the respondents were presented. According to the table the
majority of the respondents 56(50.9%) of the respondents were married. Following this
49(44.5%) of the respondents were single. While 5(4.5%)of the respondent were
divorced.According to the above result it implies that different marital status were
involved in this study.

Table 6The position of the respondents

31
 Frequency Percent Valid Percent Cumulative
Percent
Member 90 81.8 81.8 81.8
Member of board of
6 5.5 5.5 87.3
directors
Valid member of control
1 .9 .9 88.2
committee
Other 13 11.8 11.8 100.0
Total 110 100.0 100.0
Source: field survey, 2018

In table 6 the position of the respondents were presented. According to the table the
majority of the respondents 90(81.8%) of the respondents were member. Following this
13(11.8%) of the respondents were other and 6(5.5%)of the respondent were member of
board of directors while 1(0.9%) of the respondents were member of control
committee.This implies that member with different position were participated in the
study.

4.1 Results of Measures of Central Tendency and Dispersion

There are a number of determinants of member’s loan repayment performance. This part
Explains the descriptive statistics calculated on the basis of the determinants of member’s
loan repayment performance. The results for measures of central tendency and dispersion
were obtained from the sample of respondents of Awach saving and credit cooperative
society respondents are shown in the following tables. The way of interpretation of the
mean value was by considering the classification of table 7.

32
Table 7 Five Scaled Likert Criterion

NO mean range response option

1 1 to 1.80 strongly disagree
2 1.8 to 2.6 Disagree
3 2.6 to 3.4 Neutral
4 3.4 to 4.20 Agree
5 4.2 to 5.00 Strongly Agree
Source: Al-Sayaad et al. (2006, as cited by Bassam, 2013).

4.2.1 Loan repayment performance that determine member’s loan

repayment performance

Table 8The Means and Standard Deviations of loan repayment Related

Factors ThatDetermines members loan repayment performance

Descriptive Statistics
N Mean Std. Deviation

I have paid the loan on due date 110 3.45 1.437

Credit repayment period was adequate 110 3.48 1.457

Regular visited by loan officer 110 3.48 1.476

Total mean 110 3.47 1.36

Source: field survey, 2018

Respondents were asked about their loan repayment performance. According to the table
above regarding Regular visited by loan officer with mean value 3.48 and standard
deviation 1.47 which implies the respondent were agree, as far as the mean range is
between 3.4-4.2.followingthis creditrepayment period was adequate with mean
value 3.48 and standard deviation 1.45 this implies that respondent were agree as
far as the mean rang is between 3.4-4.2 and also question for respondents about I
have paid the loan on due date with mean value 3.45and standard deviation 1.43

33
which Implies that respondents were agree like the above mean range. Generally the
variable loan repayment performance with mean 3.47 and standard deviation 1.36
which falls in the range of 3.4 up to 4.2, which implies the majority of the
respondent were in agree status. But the value is near to the cut point, which means
the loan repayment performance tends to the status of neutral and forced the
respondent to become neutral or undecided.The finding is supported with the research
work of jamel (2000) which concludes regular visited by loan officer and credit
repayment period. This is one of theconsequences of minimal effect on loan repayment
performance.

34
 4.2.2 Economic factors that determine member’s loan repayment
performance

Table 9 The Means and Standard Deviations of Economic Related Factors That
Determines members loan repayment performance

Descriptive Statistics
N Mean Std. Deviation

Loan amount availed was less than what was

110 2.85 .937
requested
I have other income source 110 2.94 .979
The business type i am engaged was affect my
110 2.97 1.121
credit repayment

The income generate from the business is low and

110 2.81 1.036
affect the credit repayment
Lack of business experience affects the credit
110 3.69 1.147
repayment

Location of business operation affect credit payment 110 2.92 1.235

High inflation rate affect the effectiveness of my

110 2.89 1.336
business due to capital shortage

The interest rate of loan is fair 110 2.88 1.325

Lack of investment opportunities affect credit

110 3.41 3.913
repayment
3.04
Total mean 110
0.86
Source:field survey, 2018

Respondents were asked about their economic factors that affects loan repayment
performance. According to the table above regarding Lack of business experience affects
the credit repayment and Lack of investment opportunities affect credit repayment with
mean value 3.41,3.69and standard deviation 3.9,1.14 respectively which implies the

35
respondent were agree, as far as the mean range is between 3.4 -4.2. following this , The
income generate from the business is low and affect the credit repayment, Loan amount
availed was less than what was requested, The interest rate of loan is fair, High inflation
rate affect the effectiveness of my business due to capital shortage, Location of business
operation affect credit payment,I have other income source , The business type i am
engaged was affect my credit repayment, with mean value
2.81,2.85,2.88,2.89,2.92,2.94,2.97respectivelyandstandarddeviation1.03,0.93,1.32,1.33,1.
23,0.97,1.12and 3.91 parallel with the mean value this implies that respondent were
neutral as far as the mean rang is between 2.6-3.4. Generally the variable economic
factor with mean 3.04 and standard deviation 0.86 which falls in the range of 2.6 up
to 3.2, which This implies the majority of the respondent are neutral or undecided. Also
The finding is supported with the research work of jamel (2000) which concludes loan
size. This is one of the consequences of minimaleconomic factors.

36
4.2. 3 Institutional Factors That Determine Member’s Loan Repayment
Performance

Table 10the Means and Standard Deviations of institutional Related Factors That
Determines members’ loan repayment performance

Descriptive Statistics
N Mean Std. Deviation
There was poor follow up by credit
110 3.29 1.384
officers
There was lack of aggressive credit
110 3.10 1.270
collection methods
There was no sound financial management
110 2.75 1.009
training by the cooperatives
The amount of credit forwarded was
110 2.66 .951
inadequate
Timeliness of loan release affects the
110 2.67 .930
effectiveness of the business

Cooperative staff inexperience and lack of

110 2.61 1.174
training affects the credit repayment

The repayment period was short 110 2.45 .963

There was no constant credit policy 110 3.31 1.380

Total mean 110 2.85 0.92

Source: field survey, 2018

According to table 10 for question there was lack of aggressive credit collection
methods,There was poor follow up by credit officers and There was no constant credit
policy with the mean value 3.10,3.20 3.31 respectively and standard deviation
1.27,1.38,1.38 parallel with the respective mean this implies the respondents were agree
with the mean range 3.4-4.2 .following this for question The repayment period was short
with mean value2.45 and standard deviation 0.963 the respondents were disagree with the

37
mean range 1.8-2.6 further, for the rest question Cooperative staff inexperience , lack
of training affects the credit repayment, The amount of credit forwarded was inadequate,
Timeliness of loan release affects the effectiveness of the business and There was no
sound financial management training by the cooperatives with mean value of
2.61,2.66,2.67,2.75respectively and with standard deviation 1.174,0.951,0.930,1.009
respectively with the mean value ,this shows that the respondents were neutral with the
mean range 2.6-3.4.Generally the variable economic factor with mean 2.85 and
standard deviation 0.92 which falls in the range of 2.6 up to 3.2, This implies the
majority of the respondent are neutral or undecided.The finding is supported with the
research jemal (2003) which concludes Credit repayment period was problem for loan
repayment performance . This is one of the consequences of minimal institutional factors
.

4.2. 4. Cultural factors that determine member’s loan repayment performance

Table 11the Means and Standard Deviations of cultural Related Factors That Determines
members loan repayment performance.

Descriptive Statistics
N Mea Std.
n Deviation

Participation in social ceremonies affects

110 3.31 1.179
the credit repayment
Without cooperatives force am able to
110 3.26 1.318
repay the loan
Diversion of loan to social commitments 110 3.41 1.287

Engaged in more extravagant practice 110 3.25 1.328

the size of house hold affect my capacity

110 3.10 1.361
to repay the loan
Total mean 110 3.26 1.11
Source: field survey, 2018

38
According to table 11 for Diversion of loan to social commitments with the mean value
of 3.41and standard deviation 1.28 this implies the respondents were agree with the mean
range 3.4-4.20, followingthis for the size of house hold affect my capacity to repay the
loan, Engaged in more extravagant practice, Without cooperatives force am able to repay
the loan and for Participation in social ceremonies affects the credit repayment with mean
value 3.10,3.25,3.26 and 3.31and standard deviation 1.36,1.32,1.31and 1.17 parallel with
the mean value shows that the respondents were neutral with the mean range 2.6-
3.4.which implies the majority of the respondent were in agree status.This shows
that there is Diversion of loan to social commitments.Generally, according to table 11
economic related factors are critical for loan repayment performance with mean value
3.26 and with standard deviations 1.11 which implies the majority of the respondents are
agreed.
The finding is supported with the research work of jemal (2000)and Millionet al. (2012)
which concludesCeleberation of social ceremony ,loan diversion and family size of the
house hold are the key problem for loan repayement performance .This is one of the
consequences of highercultural factors .

Therefore the following table shows the Pearson product moment correlation between
theDependent and independent variables. The interpretation will follow the above
classifications.

39
Table 12 the Relationship between Independent Variables and loan repayment
performance

Correlation
loan economic institutiona cultural
repayment factors l factors factors
performanc
e
Pearson
1 .144** -.041* -.508**
loan repayment Correlation
performance Sig. (2-tailed) .000 .040 .000
N 110 110 110 110
Pearson
.144** 1 .243* .082
Correlation
economic factors
Sig. (2-tailed) .000 .011 .393
N 110 110 110 110
Pearson
-.041* .243* 1 -.188*
Correlation
institutional factors
Sig. (2-tailed) .040 .011 .049
N 110 110 110 110
Pearson
-.508** .082 -.188* 1
Correlation
cultural factors
Sig. (2-tailed) .000 .393 .049
N 110 110 110 110
**. Correlation is significant at the 0.01 level (2-tailed).*.
Correlation is significant at the 0.05 level (2-tailed).

4.3.2.1 Correlation analysis between economic factors with Loan repayment

performance

Pearson correlation test were conducted to see the degree of relationship between the
independent variable i.e. economic factors with the dependent variable, loan repayment
performance. The results of the correlation between the variables were shown in the
table 12

40
There is found significant correlation between economic factors and loan repayment
performance. In other words, small and positive correlation value were found between
economic and loan repayment performance(r=0.144, p<0.01), which is statistically
significant with 1% significance level or at 99% confidence level.

4.3.2.2 Correlation analysis between Institutional factors with Loan repayment

performance

Pearson correlation test were conducted to see the degree of relationship between the
independent variable i.e. institutional factors with the dependent variable, loan repayment
performance. The results of the correlation between the variables were shown in the
table 12
There is found significant correlation between institutional factors and loan repayment
performance. In other words, small and negative correlation value were found between
institutional factors and loan repayment performance(r=-0.041, p<0.05), which is
statistically significant with 5% significance level or at 95% confidence level.

4.3.2.3 Correlation analysis between cultural factors with Loan

repayment performance

Pearson correlation test were conducted to see the degree of relationship between the
independent variable i.e. cultural factors with the dependent variable, loan repayment
performance. The results of the correlation between the variables were shown in the
table12
There is found significant correlation between cultural factors and loan repayment
performance. In other words, medium and negative correlation value were found between
cultural factors and loan repayment performance(r=-0.508, p<0.01), which is statistically
significant with 1% significance level or at 99% confidence level.

41
4.3.3 Regression Analysis

4.3.3.1.Multiple linear Regressions Analysis

Regression is the determination of a statistical relationship between two or more variables

(Kothari, 2004, p.141). Thus for the purposes of determining the extent to which the
explanatoryvariables explain the variance in the explained variable, regression analysis
was employed. It isalso used to understand by how much each independent variable
(economic factors, institutional cultural factors towards Awach saving and credit
cooperative society products) explains the dependent variable (loan repayment
performance).

4.3.3.1.1Multiple linear Regressions Analysis Assumption

Before regression analysis takes place, the paper considered various assumptions, which
can affectthe reliability of the model employed. In the practical world, multiple
regression models subjectedto enormous important assumptions. In various researches,
model fitness examined through testingof the linearity of each independent and
dependent variables, normality of residuals andmulticollinearity of the model.
Accordingly, that assumption has tested under this research paper.The results of such
analysis are narrated under.

4.3.3.1 .2 No Multicollinearity

This assumption was checked by tolerance value and variance inflation factors. Tolerance
is anIndicator of how much of the variability of the specified independent is not
explainedby the other independent variables in the model. If this value is very small (less
than .10) it indicates that the multiple correlation with other variables is high, suggesting
the possibility ofmulticollinearity. The other value given is the VIF (Variance inflation

42
factor), whichthe values above 10 would be a concern here, indicating multicollinearity
(Pallant, 2011, p.150).
In this paper table13 shows that there is no multicolleniarity among variables. The
tolerance valuefor each independent variable the lowest .8.97, which is not less than .10;
therefore, it does notviolated the multicollinearity assumption. This is also supported by
the VIF value, which is thehighest 1.114, which is well below the cut-off of 10.

Table 13 multi collegiality test result

Coefficients

Model Un standardized Standardiz T Sig. Collinearity

Coefficients ed Statistics
Coefficient
s
B Std. Beta Toleran VIF
Error ce
(Constant) 5.449 .583 9.349 .000
economic
.377 .130 .240 2.906 .004 .924 1.082
factors
1 institutional
.303 .124 .206 -2.454 .016 .897 1.114
factors
cultural
.692 .100 .566 -6.932 .000 .947 1.056
factors
a. Dependent Variable: loan repayment performance

Source; field survey 2018

43
4.3.3.1 .3 Independence of the residuals

It is basically the same as saying that individual data points to be independent from one
another(or uncorrelated. This assumption was checked by using Durbin-Watson statistic.
This statistic can vary from 0 to 4. For the assumption to be met, the value shall be close
to 2. In this case as themodel summary table 14 shows the Durban-Watson value is 1.598
which is close to 2. Therefore, this assumption has been met.

Table 14 model Summary

Model Summaryb
Model R R Square Adjusted R Std. Error of the Durbin-Watson
Square Estimate
1 .575a .330 .311 1.13107 1.598
a. Predictors: (Constant), cultural factors, economic factors, institutional factors
b. Dependent Variable: loan repayment performance

4.3.3.1.4Normality

In this assumption the residuals should be normally distributed about the predicted
dependent variable scores (Pallant, 2011, p.151). This assumption was tested by looking
thedistribution of the residuals. It had checked by looking Normal Probability Plot (P-P)
of the
Regression Standardized Residual and histogram. Normal Probability Plot (P-P) of the
RegressionStandardized Residual, the closer the dots lie to the diagonal line, the closer to
normal the residualsare distributed (p.151). As Fig 2 Shows the data point or dots touches
and closes the line. Thusthis assumption has been also meet.

44
Fig 2 .Normal probability plot(p-p)of the regression standardized
residual

45
4.3.3.3 Regression Analysis of Determinant factors for the Members loan
Repayment performance

Table 15 Regression Analysis of Determinant factors for the Members loan

Repayment performance

Model Summaryb

Model R R Square Adjusted R Std. Error of the Durbin-Watson

Square Estimate
1 .575a .330 .311 1.13107 1.598
a. Predictors: (Constant), cultural factors, economic factors, institutional factors
b. Dependent Variable: loan repayment performance

Source; field survey 2018

The model summary in table15 presents how much of the variance in the dependent
variable isexplained by the model. In the model summary R Square tells how much the
variance in thedependent variable (loan repayment performance) is explained by the
model(which includes economic, institutional and cultural factors). In this case the value
is 0.330, expressed as percentage 33%. This means that the model(which include
economic, institutional and cultural factors) explains 33% of the variance in the loan
repayment performance. When a small sample is involved, the R square value in the
sample tends tobe a rather optimistic overestimation of the true value in the population
(Pallant, 2010, p.160 byciting Tabachnick & Fidell 2007). Adjusted R square statistic
corrects this value to provide a betterestimate of the true population value (Pallant, 2010,
p.161). But if the sample size is above 100and the independent variables are below five
or six it is possible to use the R Square value(Yalew,2004, p.380). In this case according
to table15 the value of R Square and Adjusted RSquare is 0 .330 and .311 respectively.
There is no significant difference between R Square andAdjusted R Square. Thus, the
value of the R square indicates that 33 percent of variance in thedependent variable was
explained by the model. The remaining 77 % of the variance is explainedby other
variables not included in this study.

46
Table 16 dependent and independent variables

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

Regression 66.903 3 22.301 17.432 .000b

1 Residual 135.607 106 1.279
Total 202.510 109
a. Dependent Variable: loan repayment performance
b. Predictors: (Constant), cultural factors, economic factors, institutional factors

ANOVA helps to assess the statistical Significance of the result (Pallant, 2010, p.161).
According to table16 shows that, in this case the model reaches statistically significance
(Sig. =.000, this really means P<.0005).

Table 17 Regression analysis of the independent and dependent variable

Coefficients

Model Unstandardized Standardize T Sig. Collinearity

Coefficients d Statistics
Coefficients
B Std. Beta Toleranc VIF
Error e
(Constant) 5.449 .583 9.349 .000
economic
.377 .130 .240 2.906 .004 .924 1.082
factors
1 institutional -
-.303 .124 -.206 .016 .897 1.114
factors 2.454
cultural -
-.692 .100 -.566 .000 .947 1.056
factors 6.932
a. Dependent Variable: loan repayment performance

Table 17 shows, Unstandardized Coefficients and Standardized Coefficient. In

constructing regression equation, unstandardized coefficient values is useful. The
unstandardized coefficientsB column, gives us the coefficients of the independent

47
variables in the regression equation including all the predictor variables as indicated
below. Loan Repayment performance=05.449+0.377(Economic factors) +
-0.303(institutional factors) +-0.692(cultural factors)Also Standardized Coefficient is
useful to know which variables included in the model contributed to the prediction of the
dependent variables. It is important to compare each variables contribution. The beta
weight is the average amount the dependent variable increases when the independent
variable increases by one standard deviation (all other independent variables are held
constant).As these are standardized we can compare them.

4.3.3.3.1The Effect of Economic Factors on Members loan repayment

performance

As table 17 shows economic factors has Beta value of .240, this meansthat this variable
has positive significant contribution to explain the dependent variable i.e.Loan repayment
performance, when the variance explained by all other variables in the model is
controlled for. By looking at the Sig.-value in table17 it is possible to interpret whether
the particular independent variable has a significant relationship with the dependent
variable. The relation shipis significant if the Sig. value is not larger than 0.05. The
results show that there is a significant relationship for Economic factors (0.004) and
members loan repayment performance. Based on table17 when economic factors
increased on average by one unit members loan repayment performance increased by
0.240 units while other variables remain Constant.

4.3.3.3.2The Effect of Institutional Factors on Members loan repayment

performance

As table17 shows institutional factors have Beta value of.-206 this means that this
variable has negative significant contribution to explain the dependent variable i.e.Loan
repayment performance, when the variance explained by all other variables in the model
is controlledfor. By looking at the Sig.-value in table 17 it is possible to interpret whether
the particularindependent variable has a significant relationship with the dependent
variable. The relationshipis significant if the Sig. value is not larger than 0.05. The results

48
show that there is a negative significantrelationship for institutional factors (0.016) and
members loan repayment performance. Based on table 17 when institutional factors
increased on average by one unit members loan repayment performance decreased
by0.206 units while other variables remain Constant.
Interpreting the constant is worthless. If needed when the independent variables
coefficient gets zero loan repayment performance will be 5.449. It does not give that
much meaning.

4.3.3 .3.3 The Effect of cultural Factors on Members loan repayment

performance

As table17 shows cultural factors has Beta value of.-566 this means that this variable has
positive significant contribution to explain the dependent variable i.e. Loan repayment
performance, when the variance explained by all other variables in the model is
controlled for. By looking at the Sig.-value in table 17 it is possible to interpret whether
the particular independent variable has a significant relationship with the dependent
variable. The relationship is significant if the Sig. value is not larger than 0.05. The
results show that there is a significant relationship for cultural factors (0.000) and
members loan repayment performance. Based on table 17 when cultural factors increased
on average by one unit members loan repayment performance decreased by 0.566 units
while other variables remain Constant.
In addition to these, the paper aims to identify which variables contributed the most to
predictionof the dependent variable, in Awach saving and credit loan repayment
performance . This information can be investigated via Standardised coefficient Beta in
table 17. In this paper the highest Beta value is 0.566 irrespectiveof the minus sign for
cultural related factor, and second highest is 0.240 for economic relatedfactor. And
institutional related factor with beta value 0.206 this are also good predictors.These result
enable to conclude that the model can explain 33.0 of the variance in the
dependentvariable i.e. loan repayment performance. The largest unique contribution
provided by the variable cultural factor. Economic and institutional factors in their order
are also good predictors of the dependent variable i.e. loan repayment performance

49
 CHAPTER FIVE

CONCLUSIONS AND RECOMMENDATIONS

1. Introduction

In this chapter the conclusions and recommendations are discussed. The conclusion are
drawnbased on the research objectives. Recommendations are also drawn based on the
research findings for the government bodies Awach SACCO and other researchers.

5.1. Conclusions

The central theme of the paper was to identify determinants ofmember's loan repayment
performance in Addis Ababa particularly in Arada sub-city at wereda 7 .specifically it
aim to identify and investigate how economic ,institution and cultural factors affect the
loan repayment performance in Awach saving and credit cooperative society in arada sub
city wereda seven .
It also aims that to investigate factors among economic, institutional and cultural factors
which are the key determinant factors forAwach saving and credit cooperative society in
the study area
Based on the research finding and the objectives the following conclusion are drawn

In the study area a branch of Awach saving and credit cooperative society faces different
determinant factors related with member loan repayment performance .cultural related
factors are critical determinant factors for member's loan repayment performance
.cultural related factor
i.e . Diversion of loan to social commitments were central determinantFactor for awach
saving and credit cooperatives society.

50
Economic was another determinant factors for for Awach saving and credit cooperative
society in the study area .Lack of business experience affects the credit repayment and
Lack of investment opportunities affect credit repayment.
Institution related factors were high for Awach saving and credit cooperative
society.There was poor follow up by credit officers,there was lack of aggressive credit
collection methodsthe repayment period was shortthere was no constant credit policy.

As far as the descriptive result is concerned for Awach saving and credit cooperative
society cultural related factor and economic factors are critical factors for member’s loan
repayment performance. Where as institutional were not that much critical determinant
factors for loan repayment performance.

Finally according to the empirical finding of the paper economic factor have small
significant positive correlation with loan repayment performance and institutional factor
have negative significant and small correlation with loan repayment
performance.Whereas cultural factor have significant negative medium correlation with
loan repayment performance. In addition to this the independent variables such as
economic, institution and cultural explain the variation of the dependent variable which is
loan repayment performance in the study area .in this regard. Institutional, economic
and Cultural factors can explain better the variation of dependent (loan repayment)
respectively in the study area.

5.2. Recommendations

Suggestions and recommendations are basic to sustain and fasten the growth of Awach
saving and credit cooperative society. Based on the finding of this research the following
recommendations are forwardedfor government bodies, for Awach saving and credit
cooperative society and other researchers.
The federal cooperative agency particularly cooperatives finance directorates and other
concerned bodies should provide all inclusive support.They should have create awareness
about different kinds of business opportunity, how business experience have its own side

51
effect for doing any business and also dealing with board of directors in what way they
should prepare aggressive credit collection method and continues follow up by credit
officers for credit to repay on time and also dealing with the credit repayment period
should be amendablefor suitable repayment period in the bylaws and ratified by general
assembly.
In addition to this Awach SACCO should have a kind of constant credit policy as far as
other saving and credit cooperatives runs best fitted for members to repay the debt on the
right time. Therefore other researchers can target these and other area for detail
investigations

52
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 Appendix

CPU College

MBA PROGRAM

QUESTIONNAIRE guideFOR DATA COLLECTION

Dear Respected respondents:

This questionnaire is designed to undertake MBA thesis entitled

Determinants of member loan repayment in case of Awach saving and credit
cooperative society ,in city of Addis Ababa Ethiopia for partial fulfillment
for the requirements of the awards of degree of master of business
administration CPU college. The purpose of this research is to conduct
determinants of member loan repayment in case of Awach saving and
credit cooperative society. Therefore, as the information to this questionnaire
is the base for the success of the study, I kindly request you to provide
unbiased information. The confidentiality of the information you provide me
will always be maintained and is only used for academic purpose. I would
like to thank you in advance for your cooperation in devoting your costly
time knowledge, experience and energy to respond to this questionnaire.

Minalem Girma

57
 MBA candidate

Cpu college

I. Personal Details
1. 1 Sex Male Female

1.2. Age of the respondent?

18-25 26-35  36-55 Above 56

1.3. Highest Level of education:

Primary school completedJunior completedSecondary school

completed

CertificateDiploma Degree& above

1.4. Marital status

Married Single Divorced Widowed

1.5. What is your position in the cooperative?1. Member 2. Member of

board of directors 3. Member of control committee

4. Member of loan committee 5. Other____________

58
 II. Loan repayment performance
Statement Strongly Disagree Neutral Agree Strongly

disagree agree
I have paid the loan on the due
date
Credit repayment period was
adequate
Regularly Visited by loan
officers.
Other factors leading to loan default. Please
specify--------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------

As per the table below, please tick your level of agreement on each of the
determinants which determines loan repayment performance.

59
 III. Economic factors

As per the table below, please tick your level of agreement on each of the
determinants which determines loan repayment performance
Statement Strongly Disagre Neutr Agre Strongly
e al e
Disagree agree
Loan amount availed was less than
what was requested.
I have other income sources
The business type I am engaged with
affects my credit repayment.
The income generated from the
business is low and affects credit
repayment.
Lack of business experience affects
the credit repayment.
Location of business operations affects
credit payment.
High inflation rate affects the
effectiveness of my business due to
capital shortage.
The Interest rate of the loan is fair
Lack of Investment opportunities
affects credit repayment.

Other factors leading to loan default. Please

specify------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------

60
IV .Institutional factors
As per the table below, please tick your level of agreement on each of the
determinants which determines loan repayment performance.
Statement Strongly Disagree Neutral Agree Strongly

disagree agree
There was poor follow up
by credit officers.
There was Lack of
aggressive creditcollection
methods.
There was no sound
financial management
training by the COOP.
The amount of credit
forwarded was inadequate.
Timeliness of loan release
affects the effectiveness of
the business.
COOP. Staff inexperience
and lack of training affects
the credit repayment.
The repayment period was
short.
There was no constant
credit policy.
Other factors leading to loan default. Please
specify------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------

61
 IV. Cultural factors
As per the table below, please tick your level of agreement on each of the
determinants which determines loan repayment performance.
Statement Strongly Disagree Neutral Agree Strongly

disagree agree
Participation in social
ceremonies affects the
credit repayment.
Without cooperative force
am able to repay the loan
Diversion of loans to
social commitments.
Engaged in more
extravagant practice
The size of household
affect my capacity to repay
the loan.
Other factors leading to loan default. Please
specify---------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------

Thank you!

62