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. Mixed
research design covering descriptive survey
design and correlational design was adopted
targeting 45 credit officers from financial institutions in Mogadishu Somalia and
census was undertaken. Information was
obtained from its primary form using
questionnaire that had been determined for
reliability and validity. The analysis of the
findings was done through Statistical
Package for Social Sciences utilizing
means, standard deviations, correlation and
regression analysis and tables supported the
presentation of the results. 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.