Association of Group, Lender, and Socio-Economic Factors with Group Loan Repayment Performance of MSE’s Manufacturing Sector: A Case Study in Dedebit Credit and Saving Institution (DECSI), Ethiopia

This study was conducted with the objective of analyzing the association of group, lender, and socio-economic factors with group loan repayment performance of the beneficiaries of DECSI operating in the manufacturing sector as group owned MSEs. Primary data was collected from 34 selected group leaders of the group owned MSEs borrowers by using structured questionnaire and depth-interview. Chi-square test employed to analyze the association of group related factors, lender related factors, and socio-economic related factor with group loan repayment performance. The statistical test revealed that self initiation, peer pressure, suitable loan repayment period, training, and external shocks have statistically significant association with loan repayment performance of the group borrowers; whereas homogeneity, internal and regulation, loan size, and loan supervision are found to have statistically insignificant association with group loan repayment performance, though they make difference on loan repayment performance of the group borrowers. Therefore, to improve the loan repayment performance of the group borrowers, DECSI, among others, should consider the statistically significant factors while offering group loan; and should focus on the repayment challenges which are stated by the borrowers (market linkage and loan supervision), and take corrective actions. Finally, further research on similar area is suggested by considering factors that need solution such as experience of group borrowers in the sector, group size, and lack of land; besides similar study may be conducted in other sectors of the MSEs (i.e., construction, urban agriculture, and service and trade) in order to have a holistic understanding of about the determinants of group loan repayment performance. Keywords:Chi-square, DECSI, Determinant Factors, Group Loan, Logit, Manufacturing Sector, Mekelle Microfinance, MSEs

Determinants of Group Loan Repayment Performance of MSE’s Manufacturing Sector: A Case Study in Dedebit Credit and Saving Institution (DECSI), Ethiopia

This study was conducted with the objective of identifying and analyzing the factors that influence group loan repayment performance of the beneficiaries of DECSI operating in the manufacturing sector as group owned MSEs. Primary data was collected from 34 selected group leaders of the group owned MSEs borrowers by using structured questionnaire and depth-interview. A binary logit regression model was used to analyze the group related factors, lender related factors, and socio-economic related factor that influence group loan repayment. Out of the nine explanatory variables, the six explanatory variables, i.e., group composition, group initiation, peer pressure, suitability of repayment period, loan size and external shocks have statistically significant effect on loan repayment of the group borrowers; whereas the three explanatory variables, i.e., internal rule and regulation, loan supervision, and training have statistically insignificant effect on loan repayment of the group borrowers. Therefore, to improve the loan repayment performance of the group borrowers, DECSI, among others,  should consider homogeneity, self-initiation, existence of peer pressure among members, extent of loan size with business plan of group borrowers at the very beginning, and should focus on the repayment challenges which are stated by the borrowers (market linkage and loan supervision), and take corrective actions. Finally, further research on similar area is suggested by considering factors that need solution such as experience of group borrowers in the sector, group size, and lack of land; besides similar study may be conducted in other sectors of the MSEs (i.e., construction, urban agriculture, and service and trade) in order to have a holistic understanding of about the determinants of group loan repayment performance. Keywords:Chi-square, DECSI, Determinant Factors, Group Loan, Logit, Manufacturing Sector, Mekelle, Microfinance, MSEs

Determinants of banks’ cost efficiency: a case study of selected commercial banks, Ethiopia

This study examines the determinants of cost efficiency commercial banks’ in Ethiopian using balanced panel data with a sample of 13 commercial banks over the period 2010-2017 by paying a translog stochastic cost frontier approach. The identification and selection of inputs and outputs variables was based on the intermediation approach. Accordingly, three input variables (cost of labor, cost of capital, and cost of fund) and two output variables (total loans and other earning assets) are used in the study. Furthermore, five banks specific and one macroeconomic variable are included to examine their effect on cost efficiency. So as to examine the effect of determinant variables which are associated with banks efficiency, a single stage maximum likelihood estimation method is applied to stochastic frontier cost function. The empirical estimations were accomplished by Appling a single stage maximum likelihood function assimilated into Stata software. The estimation is based on conditional mean model concepts. The finding shows that from bank specific factors, return on assets (ROA), and intermediation ratio have positive and significant for intermediation (IR) and insignificant for ROA with cost inefficiency. On the other hand, Bank size (lnTA), Credit risk (CR) and capital adequacy ratio (CAR) have a significant negative coefficient with cost inefficiency. GDP also has negative but insignificant with inefficiency. Therefore, banks are recommended to improve and sustain their efficiency by maintaining available proportion of capital adequacy ratio and attract high value, low interest-bearing demand deposits

Association of owner related and external factors with micro and small manufacturing enterprises growth in Ethiopia

This study was conducted with the objective of analyzing the association of owner related and external factors with growth of MSEs operating in the manufacturing sector. Primary data were collected from 218 randomly selected owner/operator of manufacturing MSEs and coordinators of MSEs by using structured questionnaire and interview, respectively. Chi-square test was employed to analyze the owner related/internal factors, and external factors with growth of manufacturing MSEs. The statistical test revealed that gender, initial investment size, modern machinery, training, infrastructure and location have statistically significant association with growth of manufacturing MSEs; whereas age, education level, work premises and market linkage/ access are found to have statistically insignificant association with growth of MSEs operating in the manufacturing sector, though they make difference on the MSEs growth level. Therefore, to improve the growth of manufacturing MSEs, MSEs development office in collaboration with the municipality, among others, should consider the statistically significant factors and focus on the MSEs’ challenges which are stated by the owners of the business (own working premise and market access/linkage) and take corrective actions. Finally, further research on similar area is suggested by considering factors that need solution such as previous experience of operator in the sector, firm age and access to credit; besides similar study on remaining MSEs sector and comparative study may be conducted even within the manufacturing sector as economic sub-sector (i.e., textile and garment, metal working workshop,  furniture and wood working, manufacturing bricks etc.) in order to have a holistic understanding of about the determinants of manufacturing MSEs growt