Volume 3, Issue 6, November 2018, Page: 84-94
Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office
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
Received: Jan. 18, 2019;       Accepted: Feb. 21, 2019;       Published: Mar. 7, 2019
DOI: 10.11648/j.ajmse.20180306.11      View  286      Downloads  61
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.
Keywords
Microfinance, Microcredit, Loan Default, Customer, Wasasa, Sabata Town
To cite this article
Diriba Merga Eren, Hundessa Adugna Yadeta, Assessment of Causes of Loan Default in Wasasa Microfinance S. C. Sabata Town Branch Office, American Journal of Management Science and Engineering. Vol. 3, No. 6, 2018, pp. 84-94. doi: 10.11648/j.ajmse.20180306.11
Copyright
Copyright © 2018 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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