Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office

Diriba Merga Eren; Hundessa Adugna Yadeta

doi:doi:10.11648/j.ajmse.20180306.11

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Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office

Diriba Merga Eren, Hundessa Adugna Yadeta

Published in American Journal of Management Science and Engineering (Volume 3, Issue 6)

Received: 18 January 2019 Accepted: 21 February 2019 Published: 7 March 2019

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Abstract

The study was conducted on the assessment of causes of loan default in Wasasa Microfinance S.C Sabata town branch office in order to indicate information that enables to ensure its future sustainability. Both questionnaire and interview guide were used to collect data which was analyzed using descriptive analysis. The survey made on 99 clients and 10 employees shows that the majority of clients are females which is prioritized by the institution to empower poor female household heads. More than half clients of the institution work in their own business generating income of 5000 -50,000 birr per month. Based on the result, poor loan appraisal, Burden of interest, operational inefficiency and Poor customer handling are the four major internal causes of the loan default while political instability, poor business plan, existence of illegal business and price fluctuation are four major external causes of loan default. Wasasa Microfinance uses different mechanisms to control default like negotiation with customers, writing letter of warning to defaulters, penalizing according to loan agreement and taking to court. It is recommended that Wasasa Microfinance S. C control different causes of loan default by awareness creation through training both customers and employees, and increasing institutional efficiency in operational procedures and policies. It is better for the institution to focus on capacity building, incentivizing the model staffs and using clear monitoring and evaluation system.

Published in	American Journal of Management Science and Engineering (Volume 3, Issue 6)
DOI	10.11648/j.ajmse.20180306.11
Page(s)	84-94
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Microfinance, Microcredit, Loan Default, Customer, Wasasa, Sabata Town

References

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[17]	Gezahegn Olana (2016). Assessment the Causes of Loan Default in Microfinance Institutions: The Case of Wasasa Microfinance Institution-Nekemte Branch. M.Sc. Thesis, WU.
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APA Style

Diriba Merga Eren, Hundessa Adugna Yadeta. (2019). Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office. American Journal of Management Science and Engineering, 3(6), 84-94. https://doi.org/10.11648/j.ajmse.20180306.11

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ACS Style

Diriba Merga Eren; Hundessa Adugna Yadeta. Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office. Am. J. Manag. Sci. Eng. 2019, 3(6), 84-94. doi: 10.11648/j.ajmse.20180306.11

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AMA Style

Diriba Merga Eren, Hundessa Adugna Yadeta. Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office. Am J Manag Sci Eng. 2019;3(6):84-94. doi: 10.11648/j.ajmse.20180306.11

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@article{10.11648/j.ajmse.20180306.11,
  author = {Diriba Merga Eren and Hundessa Adugna Yadeta},
  title = {Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office},
  journal = {American Journal of Management Science and Engineering},
  volume = {3},
  number = {6},
  pages = {84-94},
  doi = {10.11648/j.ajmse.20180306.11},
  url = {https://doi.org/10.11648/j.ajmse.20180306.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajmse.20180306.11},
  abstract = {The study was conducted on the assessment of causes of loan default in Wasasa Microfinance S.C Sabata town branch office in order to indicate information that enables to ensure its future sustainability. Both questionnaire and interview guide were used to collect data which was analyzed using descriptive analysis. The survey made on 99 clients and 10 employees shows that the majority of clients are females which is prioritized by the institution to empower poor female household heads. More than half clients of the institution work in their own business generating income of 5000 -50,000 birr per month. Based on the result, poor loan appraisal, Burden of interest, operational inefficiency and Poor customer handling are the four major internal causes of the loan default while political instability, poor business plan, existence of illegal business and price fluctuation are four major external causes of loan default. Wasasa Microfinance uses different mechanisms to control default like negotiation with customers, writing letter of warning to defaulters, penalizing according to loan agreement and taking to court. It is recommended that Wasasa Microfinance S. C control different causes of loan default by awareness creation through training both customers and employees, and increasing institutional efficiency in operational procedures and policies. It is better for the institution to focus on capacity building, incentivizing the model staffs and using clear monitoring and evaluation system.},
 year = {2019}
}

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TY - JOUR
T1 - Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office
AU - Diriba Merga Eren
AU - Hundessa Adugna Yadeta
Y1 - 2019/03/07
PY - 2019
N1 - https://doi.org/10.11648/j.ajmse.20180306.11
DO - 10.11648/j.ajmse.20180306.11
T2 - American Journal of Management Science and Engineering
JF - American Journal of Management Science and Engineering
JO - American Journal of Management Science and Engineering
SP - 84
EP - 94
PB - Science Publishing Group
SN - 2575-1379
UR - https://doi.org/10.11648/j.ajmse.20180306.11
AB - The study was conducted on the assessment of causes of loan default in Wasasa Microfinance S.C Sabata town branch office in order to indicate information that enables to ensure its future sustainability. Both questionnaire and interview guide were used to collect data which was analyzed using descriptive analysis. The survey made on 99 clients and 10 employees shows that the majority of clients are females which is prioritized by the institution to empower poor female household heads. More than half clients of the institution work in their own business generating income of 5000 -50,000 birr per month. Based on the result, poor loan appraisal, Burden of interest, operational inefficiency and Poor customer handling are the four major internal causes of the loan default while political instability, poor business plan, existence of illegal business and price fluctuation are four major external causes of loan default. Wasasa Microfinance uses different mechanisms to control default like negotiation with customers, writing letter of warning to defaulters, penalizing according to loan agreement and taking to court. It is recommended that Wasasa Microfinance S. C control different causes of loan default by awareness creation through training both customers and employees, and increasing institutional efficiency in operational procedures and policies. It is better for the institution to focus on capacity building, incentivizing the model staffs and using clear monitoring and evaluation system.
VL - 3
IS - 6
ER -

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Author Information

Diriba Merga Eren

Internal Audit Department, Wasasa Microfinance Share Company, Addis Ababa, Ethiopia
Hundessa Adugna Yadeta

Central Ethiopia Environment and Forest Research Center, Ethiopian Environment and Forest Research Institute, Addis Ababa, Ethiopia

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APA Style

Diriba Merga Eren, Hundessa Adugna Yadeta. (2019). Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office. American Journal of Management Science and Engineering, 3(6), 84-94. https://doi.org/10.11648/j.ajmse.20180306.11

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ACS Style

Diriba Merga Eren; Hundessa Adugna Yadeta. Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office. Am. J. Manag. Sci. Eng. 2019, 3(6), 84-94. doi: 10.11648/j.ajmse.20180306.11

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AMA Style

Diriba Merga Eren, Hundessa Adugna Yadeta. Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office. Am J Manag Sci Eng. 2019;3(6):84-94. doi: 10.11648/j.ajmse.20180306.11

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@article{10.11648/j.ajmse.20180306.11,
  author = {Diriba Merga Eren and Hundessa Adugna Yadeta},
  title = {Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office},
  journal = {American Journal of Management Science and Engineering},
  volume = {3},
  number = {6},
  pages = {84-94},
  doi = {10.11648/j.ajmse.20180306.11},
  url = {https://doi.org/10.11648/j.ajmse.20180306.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajmse.20180306.11},
  abstract = {The study was conducted on the assessment of causes of loan default in Wasasa Microfinance S.C Sabata town branch office in order to indicate information that enables to ensure its future sustainability. Both questionnaire and interview guide were used to collect data which was analyzed using descriptive analysis. The survey made on 99 clients and 10 employees shows that the majority of clients are females which is prioritized by the institution to empower poor female household heads. More than half clients of the institution work in their own business generating income of 5000 -50,000 birr per month. Based on the result, poor loan appraisal, Burden of interest, operational inefficiency and Poor customer handling are the four major internal causes of the loan default while political instability, poor business plan, existence of illegal business and price fluctuation are four major external causes of loan default. Wasasa Microfinance uses different mechanisms to control default like negotiation with customers, writing letter of warning to defaulters, penalizing according to loan agreement and taking to court. It is recommended that Wasasa Microfinance S. C control different causes of loan default by awareness creation through training both customers and employees, and increasing institutional efficiency in operational procedures and policies. It is better for the institution to focus on capacity building, incentivizing the model staffs and using clear monitoring and evaluation system.},
 year = {2019}
}

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