BORROWER'S CHARACTERISTICS AND LOAN REPAYMENT PERFORMANCE AMONG SMALL AND MEDIUM ENTERPRISES IN MOGADISHU, SOMALIA
DOI:
https://doi.org/10.55327/jaash.v9i2.306Abstract
Loan repayment among small and medium enterprises in Mogadishu has remained a challenge as demonstrated by the low recovery rates recorded by the available financial institutions like commercial banks and microfinance institutions in Somalia. This situation has contributed towards a reduction on profitability margins reported by these financial institutions. This study was set out to establish the effect of borrower's characteristics on loan repayment performance among small and medium enterprises in Mogadishu, Somalia. The information asymmetry theory provided anchorage to the study. It was observed that borrowers’ characteristics significantly explain 70.8% variation in loan repayment performance among small and medium firms in Mogadishu, Somalia (R2=0.708, p<0.05). The study concludes that borrowers’ characteristics are significant predictors of loan repayment performance among small and medium firms in Mogadishu, Somalia. The study recommends that credit officers working among financial institutions should critically and analytically appraise the borrower’s characteristics like gender, age and level of income to qualify for loans. The borrowers among the financial institutions in Somalia should adhere to the principal of utmost good faith without concealing any specific characteristic that they have knowledge of.
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Copyright (c) 2023 Abdikarin Ahmed Abdi, Ismail Ahmed Mohamud, Fatima Mohamed Hussein
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