2025/07/17 by Endris, Ebrahim
paper · doi:10.20372/nadre:9247
Loan defaulting is a prominent challenge to financial institutions' outreach and sustainability. As it has been<br> increasing and become a critical problem in the study area, this study aimed to analyze the loan repayment<br> performance of Micro and Small-scale Enterprise (MSEs) in North Wollo Zone, Amhara Region, Ethiopia. The<br> study used a multi-stage sampling technique to select 336 sample enterprises (181 non-defaulter and 155 defaulters).<br> Both qualitative and quantitative data were collected from primary and secondary data sources. The<br> descriptive statistics result showed that non-defaulting was higher in trade (29.28%) and manufacturing (21.55%)<br> MSEs, while high defaulting pertains to MSEs engaged in agriculture (24.52%) and construction (21.93%) sectors,<br> respectively. The findings of financial ratios revealed that the average current ratio, debt ratio, and debt-to-equity<br> ratio were 0.65, 0.72 and 7.95, respectively. The logit regression result showed that enterprise manager education<br> level, collateral security, and financial literacy positively and significantly affected loan repayment performance<br> while distance to lending institutions, repayment period, and loan diversion negatively affected it. Therefore, this<br> study recommends that lending institutions and other concerned organizations organize warranties for the loan,<br> align repayment schedules with the production period of enterprises, inclusive monitoring and supervision, and<br> provide financial and basic business training to enterprises.